Fact Pattern 31-3
Dhani, an accountant for Eureka, Inc., learns of undisclosed company plans to market a new laptop. Dhani buys 1,000 shares of Eureka stock. He reveals 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 information from Dhani. When Eureka publicly announces its new laptop, Dhani, Fay, Geoff, and Hu sell their stock for a profit.
-Refer to Fact Pattern 31-3. Under the Securities Exchange Act of 1934, Hu is most likely

Question

Quizplus · Accepted Answer

Hu is most likely liable for insider trading as he received insider information from a tipper (Geoff) who received it from a tippee (Fay), who got it from an insider (Dhani). The tippee/tipper liability extends down to the third level (Geoff) and potentially beyond, depending on the circumstances. Therefore, Hu, who is at the fourth level, may be held liable for insider trading.

Fact Pattern 31-3 Dhani, an Accountant for Eureka, Inc., Learns of Undisclosed Company