Fact Pattern 31-2
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 31-2. 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 31-2 
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 31-2. 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 requires that any profits made by an insider from the purchase and sale of a company's stock within a six-month period must be returned to the company. In this case, Sid is considered an insider as a director of Tech Software Company and purchased the stock before the release of the new game based on insider information. Therefore, under Section 16(b), Tech may recapture all of Sid's profits from the stock sale.