A research analyst receives nonpublic details about an unannounced tender offer directly from an executive of an acquiring firm. Rather than trading personal accounts, the analyst passes this information to a retail customer who immediately buys shares of the target company. Which of the following statements correctly describes liability under insider trading regulations?
- The analyst and the retail customer can both face legal liability for insider trading violations.Cevap
- BThe analyst cannot be held liable because no personal trading was conducted by the analyst.
- CLiability is limited solely to the acquiring firm executive who initially disclosed the tender offer details.
- DNeither party is subject to insider trading rules because the retail customer is not an employee of either corporation.
Cevap
The analyst (tipper) and the retail customer (tippee) can both be held liable for insider trading violations.
Under federal insider trading regulations, liability applies to both the person who passes material nonpublic information (the tipper) and the recipient who executes transactions using that information (the tippee). The analyst does not need to execute a trade personally to be held liable.
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Tipper and Tippee Liability