Eddie,an accountant for Fresh Dairy,Inc.,learns of undisclosed company plans to market a new smooth-tasting,fat-free butter. Eddie buys 10,000 shares of Fresh Dairy stock. He reveals the company plans to Giselle,who buys 5,000 shares. Giselle tells Hong,who tells Irwin,each of whom buy 1,000 shares. They know that Giselle got her information from Eddie. When Fresh Dairy publicly announces its new product,Eddie,Giselle,Hong,and Irwin sell their stock for a profit.
-If Eddie is liable under the Securities Exchange Act of 1934,it will be because the information on which he based his purchase of Fresh Dairy stock was

Question

Quizplus · Accepted Answer

Eddie is liable under the Securities Exchange Act of 1934 because the information on which he based his purchase of Fresh Dairy stock was not yet public. He had inside information, and by using that information to trade and to pass on to others, he violated securities laws. Materiality and truthfulness of the information are not relevant in this case. A forward-looking forecast is not the issue here because it is not mentioned that the information was based on a forecast.

Eddie,an Accountant for Fresh Dairy,Inc