Insider Trading Self-Quiz








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:
Choice 1 an interested transaction.
Choice 2 a fraudulent transfer.
Choice 3 an intrusion on corporate privacy.
Choice 4 an insider trade.
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:
Choice 1 sell the securities back to the company.
Choice 2 disgorge his profits from the deal.
Choice 3 face a civil suit from the company’s shareholders.
Choice 4 engage in counseling sessions.
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:
Choice 1 went ahead and traded now, as a contract is not sufficient enough to effect the company’s per-share price.
Choice 2 traded now, but was prepared to sell if the market does not react as favorably as he predicts.
Choice 3 sold his holdings in the company, as his insider knowledge makes it impossible for him to trade the shares for any value greater than their current value.
Choice 4 waited until market had full knowledge of the deal, then waited a while longer for the price of the stock to settle.
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:
Choice 1 own at least 10% of the company’s outstanding shares.
Choice 2 have been present at a meeting when the insider information was presented.
Choice 3 be an inside director.
Choice 4 be chairman of the board.

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