Jason Grady works on the loading dock at VIP Enterprises,Inc.Jason has noticed that shipments have slowed down for the past two months.VIP will issue its quarterly earnings report in three days.During a pool game at a local bar,Jason mentions to one of his friends that VIP is struggling because he is not loading the shipments he once did.Jason's friend positions himself short in VIP stock the next day.When VIP announces it quarterly earnings the next day,VIP's stock drops 17% and Jason's friend was able to make $5,200 on his short position.Which of the following statements is correct?

Question

Jason Grady works on the loading dock at VIP Enterprises,Inc.Jason has noticed that shipments have slowed down for the past two months.VIP will issue its quarterly earnings report in three days.During a pool game at a local bar,Jason mentions to one of his friends that VIP is struggling because he is not loading the shipments he once did.Jason's friend positions himself short in VIP stock the next day.When VIP announces it quarterly earnings the next day,VIP's stock drops 17% and Jason's friend was able to make $5,200 on his short position.Which of the following statements is correct?​

Quizplus · Accepted Answer

Section 10b of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, prohibit fraudulent activities of any kind in connection with the purchase or sale of securities, regardless of the insider's position within the company, the intent behind the communication, or the type of trading strategy employed (including short positions). Jason's unintentional tip that led to his friend profiting from a short position based on non-public, material information could still fall under insider trading regulations.

Jason Grady Works on the Loading Dock at VIP Enterprises,Inc