Asked by Sharolyn Campbell on May 16, 2024
Verified
Ross, a sales executive with Steel Mill Inc., learns of undisclosed company plans to produce a new type of steel. Ross tells Tim, who tells Uri, who buys 100 shares of Steel Mill stock. Uri knows that Tim got the information from Ross. When the firm publicly announces its new product, Uri sells the stock for a profit. Under the Securities Exchange Act of 1934, Uri is most likely
A) liable for insider trading.
B) not liable because Uri is only a tippee, not a tipper.
C) not liable because Uri is too far removed from the initial disclosure.
D) not liable because Uri traded on the basis of a material fact.
Insider Trading
Engaging in stock exchange transactions for personal benefit by exploiting confidential information, an act considered illegal.
Securities Exchange Act
A U.S. law regulating the trading of securities, aimed at protecting investors and maintaining fair and efficient markets.
Tipper
An individual who provides privileged, non-public information to another person, typically about securities trading.
- Understand the legal ramifications of engaging in insider trading and the misappropriation of proprietary, nonpublic information.
Verified Answer
DR
Dejan RadojevicMay 19, 2024
Final Answer :
A
Explanation :
Uri is liable for insider trading because he knowingly traded on material, non-public information received from a tipper (Ross) through an intermediary (Tim), which is a violation of the Securities Exchange Act of 1934.
Learning Objectives
- Understand the legal ramifications of engaging in insider trading and the misappropriation of proprietary, nonpublic information.