Fact Pattern 19-1
Sid, a director of Tech Software Company, learns that a Tech engineer has developed a new, exciting video game. Sid buys Tech stock and tells his friend Uri, who also buys Tech stock. When the new game is released three weeks later, Sid and Uri sell their stock for a big profit.
-Refer to Fact Pattern 19-1. Regarding Sid's profits on the purchase and sale of Tech stock, under Section 16(b) of the Securities Exchange Act of 1934 Tech may recapture

Question

Fact Pattern 19-1 
Sid, a director of Tech Software Company, learns that a Tech engineer has developed a new, exciting video game. Sid buys Tech stock and tells his friend Uri, who also buys Tech stock. When the new game is released three weeks later, Sid and Uri sell their stock for a big profit.
-Refer to Fact Pattern 19-1. Regarding Sid's profits on the purchase and sale of Tech stock, under Section 16(b) of the Securities Exchange Act of 1934 Tech may recapture

Quizplus · Accepted Answer

Section 16(b) of the Securities Exchange Act of 1934 states that any profits made by an insider (such as a director) within six months of buying and selling company stock must be disgorged (returned) to the company. In this case, Sid bought Tech stock and sold it for a profit within three weeks, making him liable to return all of the profits he made to Tech. Therefore, Choice A is correct.