Walter was the president of JKL,Inc.JKL intended to purchase Target Co.JKL's intent was not public information,and when it became public,Target's stock would increase significantly in value.Walter bought no stock himself,but told his best friend of JKL's plan,and his friend bought 1,000 shares of Target Co.Ten months later,when the merger was publicly announced,the friend sold Target's stock and made a large profit.Several stockholders of Target sue Walter and his friend under the provisions of the Securities Acts.What results?

Question

Quizplus · Accepted Answer

Both Walter and his friend have violated Rule 10b-5, which prohibits insider trading or the use of nonpublic information for trading purposes. Even though Walter did not purchase any stock, sharing confidential information with his friend is still considered illegal insider trading. The friend also violated the law because they were tipped off by Walter and traded based on nonpublic, material information. The fact that the friend is not an insider is irrelevant, as they were still illegally using insider information.

Walter Was the President of JKL,Inc