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, Geoff is most likely

Question

Quizplus · Accepted Answer

Geoff is most likely liable for insider trading because he bought stock based on information that he knew was obtained from Dhani, an insider of Eureka. The fact that he did not prevent others from profiting or solicit information from Dhani does not excuse his actions. The Securities Exchange Act of 1934 prohibits not only insider trading but also trading based on information obtained from insiders. Furthermore, there is no requirement that Geoff works for Eureka in order to be liable for insider trading.

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