Fact Pattern 30-2
Eddie, an accountant for Fresh Dairy, Inc., learns of undisclosed company plans to market a new smooth-tasting, fat-free butter. Eddie buys 10,000 shares of Fresh Dairy stock. He reveals the company plans to Giselle, who buys 5,000 shares. Giselle tells Hong, who tells Irwin, each of whom buy 1,000 shares. They know that Giselle got her information from Eddie. When Fresh Dairy publicly announces its new product, Eddie, Giselle, Hong, and Irwin sell their stock for a profit.
-Refer to Fact Pattern 30-2. If Eddie is liable under the Securities Exchange Act of 1934, it will be because the information on which he based his purchase of Fresh Dairy stock was

Question

Fact Pattern 30-2
​Eddie, an accountant for Fresh Dairy, Inc., learns of undisclosed company plans to market a new smooth-tasting, fat-free butter. Eddie buys 10,000 shares of Fresh Dairy stock. He reveals the company plans to Giselle, who buys 5,000 shares. Giselle tells Hong, who tells Irwin, each of whom buy 1,000 shares. They know that Giselle got her information from Eddie. When Fresh Dairy publicly announces its new product, Eddie, Giselle, Hong, and Irwin sell their stock for a profit.
-Refer to Fact Pattern 30-2. If Eddie is liable under the Securities Exchange Act of 1934, it will be because the information on which he based his purchase of Fresh Dairy stock was​

Quizplus · Accepted Answer

Eddie is liable under the Securities Exchange Act of 1934 because he traded on insider information – information that was not yet public. The fact that the information was material (meaning it would have been important to an investor in making a decision to buy or sell stock) and turned out to be true is irrelevant to the question of liability under the Act.

Fact Pattern 30-2 ​Eddie, an Accountant for Fresh Dairy, Inc., Learns of Undisclosed

Fact Pattern 30-2 Eddie, an Accountant for Fresh Dairy, Inc., Learns of Undisclosed