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Zorluk: KolayInsider Trading and Misuse of Material Nonpublic Information

An independent IT contractor working at a software firm learns about an unannounced corporate acquisition while servicing company servers. The contractor passes this material nonpublic information to a friend, who buys shares of the target company and makes a profit. Which of the following statements correctly describes the legal liability under federal securities laws?

  1. Both the contractor and the friend can be held liable for insider trading violations.Cevap
  2. B
    Only the contractor can be held liable because the friend is not an employee or insider of the firm.
  3. C
    Neither party is liable because an independent contractor is not classified as a corporate officer or director.
  4. D
    The friend is exempt from liability as long as no cash payment was made to the contractor for the tip.

Cevap

Both the contractor and the friend can be held liable for insider trading violations.
Under the Insider Trading Sanctions Act and SEC Rule 10b-5, insider trading liability extends to both the tipper and the tippee. The IT contractor acts as a temporary insider owing a duty of confidentiality to the firm. Passing confidential merger details breaches that duty (tipper liability). The friend who receives and trades on the material nonpublic information is also liable (tippee liability) because they acted on improperly disclosed nonpublic data.

Adım Adım Çözüm

1
Identify the nature of the information.
The information regarding an unannounced acquisition obtained by the IT contractor is material nonpublic information.
Information that would significantly affect an investor's decision to buy or sell a security and is not yet public is classified as material nonpublic information.
2
Evaluate the tipper's liability.
The IT contractor breached a duty of trust and confidence by disclosing confidential client information.
Contractors with access to nonpublic corporate data are treated as temporary insiders owing a duty of confidentiality.
3
Evaluate the tippee's liability.
The friend who traded on the tip is liable as a tippee.
A tippee who knows or should know that information was disclosed in breach of a duty is subject to insider trading penalties upon executing trades based on that tip.

Anahtar Kavram

Tipper and Tippee Liability under Insider Trading Rules
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Konular

Insider Trading and Misuse of Material Nonpublic Information