Dhani,an accountant for Eureka,Inc.,learns of undisclosed com-pany plan-s to market a new laptop.Dhani buys 1,000 shares of Eureka stock.He re-veals the company plans to Fay,who buys 500 shares.Fay tells Geoff,who tells Hu.Both Geoff and Hu buy 100 shares.They know that Fay got her informa-tion from Dhani.When Eureka publicly an-nounces its new laptop,Dhani,Fay,Geoff,and Hu sell their stock for a profit.
-Refer to Fact Pattern 26-3.Under the Securities Ex-change Act of 1934,Fay is most likely

Question

Quizplus · Accepted Answer

Fay is most likely liable for insider trading because she bought stock based on material nonpublic information obtained from Dhani, who had a duty to keep that information confidential as an accountant for Eureka. The fact that Fay told others and did not prevent them from profiting does not excuse her own potential violation of the securities laws. The fact that Fay did not solicit information from Dhani or did not work for Eureka is not relevant to her liability for insider trading.

Dhani,an Accountant for Eureka,Inc