During a compliance training session on insider trading regulations, a firm's Chief Compliance Officer presents a scenario where an executive passes material nonpublic information about an upcoming merger to a relative, who subsequently trades on the tip. Which of the following statements regarding tipper and tippee liability under federal securities laws are correct?
- The tipper can be held liable for insider trading violations even if the tipper did not execute any personal trades in the security.Cevap
- BA tippee is exempt from insider trading liability if they are not an employee or officer of the subject company.
- A tippee who knows or should have known that information was material and nonpublic can be held liable for trading on that information.Cevap
- DCivil penalties for insider trading violations are strictly limited to disgorgement of profits, prohibiting any additional monetary fines.
Cevap
The tipper can be held liable even without executing personal trades, and a tippee who knows or should have known the information was material nonpublic can be held liable for trading on it.
Tipper liability is established when material nonpublic information is improperly disclosed in breach of a duty, even if the tipper does not trade. Tippee liability applies to any individual who trades on material nonpublic information while knowing or having reason to know that the tip originated from a breach of duty.
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Tipper and Tippee Liability under Insider Trading Regulations