Fact Pattern 27-1
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 27-1.Under SEC Rule l0b-5,Sid would not be li?able if he had waited to buy Tech stock until

Question

Fact Pattern 27-1 
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 27-1.Under SEC Rule l0b-5,Sid would not be li?able if he had waited to buy Tech stock until

Quizplus · Accepted Answer

SEC Rule 10b-5 prohibits insider trading, which is when someone buys or sells securities based on material, nonpublic information obtained through their position within a company. In this case, Sid learned about the new game as a director of Tech Software Company before it was publicly released, so buying Tech stock and profiting from the subsequent release of the game could be seen as insider trading. However, if Sid had waited to buy Tech stock until after the public release of the game, he would not have had access to any material nonpublic information, and therefore would not be liable under SEC Rule 10b-5.