An independent IT consultant performing network maintenance for a publicly traded medical technology firm discovers an unreleased internal audit report detailing an impending major product recall. The consultant shares this confidential information with a friend, who subsequently purchases put options on the firm's stock. The consultant does not trade any stock. Which of the following statements regarding tipper and tippee liability in this scenario are correct?
- The IT consultant can be held liable as a tipper because sharing material nonpublic information in breach of a duty of confidentiality constitutes a violation, regardless of whether the consultant executed any trades personally.Cevap
- The friend can be held liable as a tippee because trading on material nonpublic information obtained from someone who breached a duty creates liability when the tippee knew or should have known the information was confidential.Cevap
- CThe friend is completely exempt from insider trading liability because tippee rules apply exclusively to corporate officers, directors, and full-time employees of the issuing company.
- DThe IT consultant cannot be held liable because insider trading enforcement requires executing a securities transaction directly in an account owned by the tipper.
Cevap
The statement explaining that the IT consultant can be held liable as a tipper without executing personal trades, and the statement explaining that the friend can be held liable as a tippee for trading on known confidential information, are both correct.
Both the statement affirming the IT consultant's tipper liability and the statement affirming the friend's tippee liability are correct. The IT consultant breached a duty of confidentiality by leaking material nonpublic information regarding the product recall, satisfying tipper liability requirements without needing to execute a trade personally. The friend traded put options while knowing or having reason to know that the information was confidential, establishing tippee liability.
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Anahtar Kavram
Tipper and Tippee Liability under Insider Trading Regulations