Fact Pattern 20-3
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 20-3.If Dhani is liable under the Securities Ex-change Act of 1934,it will be because the infor-mation on which he based his purchase of Eureka stock was

Question

Quizplus · Accepted Answer

Dhani is liable under the Securities Exchange Act of 1934 because the information he used to purchase Eureka stock was not yet made public, and therefore, the purchase was based on insider trading. The fact that the information was about a new product launch makes it material, which eliminates options A and B. The truthfulness of the information is not relevant in determining liability for insider trading.

Fact Pattern 20-3 Dhani,an Accountant for Eureka,Inc.,learns of Undisclosed Com-Pany Plan-S to Market