A freelance translator hired by a publicly traded medical device company is given access to an unreleased regulatory approval document to translate it for an international market. Before the approval is publicly announced, the translator purchases 500 shares of the company's common stock based on this information. Which of the following statements correctly describes the legal status of the translator's actions under federal insider trading regulations?
- The translator is liable for insider trading under the misappropriation theory because material nonpublic information was used for personal trading in breach of a duty of confidentiality.Cevap
- BThe translator is exempt from insider trading liability because an independent contractor is not an official employee or officer of the issuing company.
- CThe translator's trade is permissible as long as the securities purchase was executed on a secondary exchange rather than directly from the issuing company.
- DThe translator violated insider trading laws only if company executives explicitly signed a non-disclosure agreement prohibiting stock trading prior to sharing the document.
Cevap
The translator is liable for insider trading under the misappropriation theory because material nonpublic information was used for personal trading in breach of a duty of confidentiality.
Under the misappropriation theory of insider trading, individuals who receive confidential material nonpublic information in the course of performing professional services (such as attorneys, accountants, printers, or translators) owe a duty of trust to the source of that information. Trading on such information for personal profit constitutes a fraudulent breach of duty and is illegal under federal securities laws.
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Misappropriation Theory and Temporary Insider Liability
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