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Question 1
Tommy, the copy shop manager in BigCo's office tower, got wind of the fact that the company was engaged in a big transaction when he photocopied a bunch of material associated with the deal. Acting on this knowledge, Tommy went out and traded BigCo's securities and made a huge profit. Tommy is guilty of committing:
Correct
Incorrect!
Correct
Incorrect!
Correct
Incorrect!
Correct When an individual who works for a company (usually an officer, but it could be anyone) has information about the company that the general investing public does not know, that individual has 'insider information.' Subsequently, if that person trades the company's securities on the basis of that information before it has become public knowledge, that person has committed insider trading and may be punished civilly and / or criminally.
Incorrect! When an individual who works for a company (usually an officer, but it could be anyone) has information about the company that the general investing public does not know, that individual has 'insider information.' Subsequently, if that person trades the company's securities on the basis of that information before it has become public knowledge, that person has committed insider trading and may be punished civilly and / or criminally.
Question 2
George has been found guilty of insider trading through a violation of Rule 10b-5. At his trial, the judge requires that he pay a civil fine and:
Correct
Incorrect!
Correct In a transaction where an insider has committed a violation of the insider trading laws, it is typical that one of the punishments required of the individual is that he disgorge (pay back) any profits he made on the transaction. In addition to any disgorgement, it is possible that the court might also ban the individual from holding a similar office in another public firm.
Incorrect! In a transaction where an insider has committed a violation of the insider trading laws, it is typical that one of the punishments required of the individual is that he disgorge (pay back) any profits he made on the transaction. In addition to any disgorgement, it is possible that the court might also ban the individual from holding a similar office in another public firm.
Correct
Incorrect!
Correct
Incorrect!
Question 3
Saul is a senior officer at XY Co. and has recently received some good news from the company's sales department. The company is just about to close on a major deal that will net the company huge profits over the next several years. Saul had been thinking about buying more shares in the firm. While he would like to reap the benefits of the new contract's effect on shares, he is concerned about the insider trading laws. Saul would be best advised if he:
Correct
Incorrect!
Correct
Incorrect!
Correct
Incorrect!
Correct It is always a difficult question for an insider to time exactly when to trade his shares. Ultimately, the best course of action is to wait until any major information has been provided to the market in general and some additional time is given for the market to settle on a new price for the security. Unfortunately, even such a conservative approach may not be enough for some courts who would rather that the insider wait till there is total calm after the information has been digested by the market. Alternatively, an insider can file a statement with the SEC committing him to regular sales of his stock on a prearranged timetable.
Incorrect! It is always a difficult question for an insider to time exactly when to trade his shares. Ultimately, the best course of action is to wait until any major information has been provided to the market in general and some additional time is given for the market to settle on a new price for the security. Unfortunately, even such a conservative approach may not be enough for some courts who would rather that the insider wait till there is total calm after the information has been digested by the market. Alternatively, an insider can file a statement with the SEC committing him to regular sales of his stock on a prearranged timetable.
Question 4
An attorney for the SEC is pursuing an insider trading case against a director of Oops, Inc. She reads Section 16b of the 1933 Act and feels that might be a good way of filing her case. If she is right, then the director in question must:
Correct Rule 16b of the 1933 Act is designed to capture transactions when inside information results in a major shareholder making a profit on trading shares for a six month window prior to and after the disclosure of major news about the firm. However, one of the basic elements of the rule is that the shareholder in question must own at least 10% or more of the company's shares.
Incorrect! Rule 16b of the 1933 Act is designed to capture transactions when inside information results in a major shareholder making a profit on trading shares for a six month window prior to and after the disclosure of major news about the firm. However, one of the basic elements of the rule is that the shareholder in question must own at least 10% or more of the company's shares.