An investor who is not employed by any public company receives confidential, material nonpublic information regarding an upcoming corporate merger directly from an officer of the acquiring company who breached their fiduciary duty. The investor subsequently uses this information to buy stock prior to the public announcement. Under federal securities laws, which of the following statements correctly describes the investor's legal standing?
- The investor has committed insider trading as a tippee because they traded on material nonpublic information knowing it was disclosed in breach of a fiduciary duty.Cevap
- BThe investor is exempt from insider trading liability because they are not an officer, director, or employee of either public company.
- CThe investor is only liable if they paid direct monetary compensation to the corporate officer in exchange for the tip.
- DThe investor has committed no regulatory violation unless they pass the confidential tip along to secondary traders.
Cevap
The investor has committed insider trading as a tippee because they traded on material nonpublic information knowing it was disclosed in breach of a fiduciary duty.
Federal securities laws hold tippees liable for insider trading if they trade on material nonpublic information while knowing (or having reason to know) that the insider breached a fiduciary duty by disclosing it. Corporate employment is not required for liability to attach.
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Tippee Liability in Insider Trading
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