Fact Pattern
Sid,a director of Tech Software Company,learns that a Tech engineer has developed "Ur Call," a new,exciting video game.Sid buys Tech stock and tells his friend Velma,who also buys Tech stock.When the new game is released three weeks later,Sid and Velma sell their stock for a big profit.
-Refer to Fact Pattern 29-1B.Under SEC Rule l0b-5,Sid would not be liable if he had waited to buy Tech stock until

Question

Fact Pattern 
Sid,a director of Tech Software Company,learns that a Tech engineer has developed "Ur Call," a new,exciting video game.Sid buys Tech stock and tells his friend Velma,who also buys Tech stock.When the new game is released three weeks later,Sid and Velma sell their stock for a big profit.
-Refer to Fact Pattern 29-1B.Under SEC Rule l0b-5,Sid would not be liable if he had waited to buy Tech stock until

Quizplus · Accepted Answer

SEC Rule 10b-5 prohibits insider trading, which occurs when someone with non-public information trades on that information to gain an unfair advantage. In this case, Sid learned of the new video game before it was released to the public, and used that information to buy Tech stock and make a profit when the game was released. However, if Sid had waited to buy Tech stock until after the public release of the game, he would not have been trading on non-public information, and thus would not have violated Rule 10b-5.

Fact Pattern Sid,a Director of Tech Software Company,learns That a Tech Engineer