A paralegal at a law firm working on an unannounced corporate acquisition discloses confidential details about the impending transaction to a sibling during a private conversation. Although the sibling does not execute any securities transactions, the sibling passes this material nonpublic information to a coworker who subsequently purchases shares of the target company and realizes a profit. Under federal securities laws, which of the following statements correctly describes the legal liability of the paralegal and the sibling?
- Both the paralegal and the sibling can be held liable as tippers under insider trading regulations, regardless of whether either traded securities directly.Cevap
- BNeither the paralegal nor the sibling can be held liable because insider trading violations require the individual possessing the information to execute a personal trade.
- CThe sibling is fully exempt from liability because tippee and sub-tipper liability applies only to employees of the publicly traded company undergoing the acquisition.
- DThe paralegal is solely liable because the duty of confidentiality originated at the law firm, absolving intermediate tippers of regulatory liability.
Cevap
Both the paralegal and the sibling can be held liable as tippers under insider trading regulations, regardless of whether either traded securities directly.
Under federal securities laws and the Insider Trading Sanctions Act, anyone who discloses material nonpublic information in breach of a duty of trust or confidence is liable as a tipper if that information leads to a transaction. Both the paralegal (who misappropriated firm information) and the sibling (who forwarded the tip) act as tippers in the chain. Personal trading by the tipper is not required for liability to attach.
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Tipper and Tippee Liability under Insider Trading Regulations
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