Which of the following statements is true of short-swing profits?
A) Short-swing profits refer to any profits made by insiders who buy and sell company stock within a three-month time period.
B) The short-swing profits rule of Section 16 depends on misuse of information.
C) Short-swing profits refer to those profits that have been made within a six-month time period.
D) The short-swing profits policy takes into consideration order of purchase and sale in determining its legality.
E) Short-swing profits are calculated on the highest price in and the lowest price out during any fiscal period.

Question

Quizplus · Accepted Answer

The reason for prohibiting insiders from trading for profit is to prevent the use of information that is available to an insider but not to the general public. Because the Securities and Exchange Commission cannot determine for certain when nonpublic information is improperly used, Section 16 creates a presumption that any profit made within a six-month time period is illegal. These profits are referred to as short-swing profits.

Which of the Following Statements Is True of Short-Swing Profits