Which of the following statements about insider trading is (are)true?
A)Employees of a firm are not allowed to buy and sell shares of their company's stock except through a trustee.
B)Insiders are allowed to buy and sell shares of their company's stock as long as their trades are not based on information that has not yet been released to the general public.
C)Any executive who buys and sells shares of his or her own company's stock is guilty of violating his or her fiduciary obligation to the firm's shareholders.
D)Both A and B are true.

Question

Quizplus · Accepted Answer

Insiders are allowed to buy and sell shares of their company's stock as long as their trades are not based on information that has not yet been released to the general public. However, they must disclose their transactions to the Securities and Exchange Commission (SEC) and the company must report any material information that would affect the stock price to the public. Therefore, statement A is not entirely true, as employees may be allowed to buy and sell shares with proper disclosure and procedures in place. Statement C is also not entirely true, as executives may buy and sell shares as long as they are not acting on material non-public information. Insiders are allowed to buy and sell shares of their company's stock as long as their trades are not based on information that has not yet been released to the general public. However, they are required to report their trades and there are strict regulations to prevent insider trading. Option A is not entirely true as there are exceptions to the rule where employees can be allowed to buy and sell shares of their own company's stock. Option C is not true as insider trading occurs when an executive trades on material non-public information, not simply buying and selling shares.

Which of the Following Statements About Insider Trading Is (Are)true