Fact Pattern 7-2
Ben, an accountant for AirLift, Inc., a ride service, learns of undisclosed company plans to distribute a new app. Ben buys 10,000 shares of AirLift stock. He reveals the company plans to Carly, who buys 5,000 shares. Carly tells Don, who tells Erwin, and each buys 1,000 shares. They know that Carly got her information from Ben. When AirLift publicly announces its new app, Ben, Carly, Don, and Erwin sell their stock for a profit.
-Refer to Fact Pattern 7-2. If Ben is liable under the Securities Exchange Act of 1934, it will be because the information on which he based his purchase of AirLift stock was

Question

Fact Pattern 7-2
Ben, an accountant for AirLift, Inc., a ride service, learns of undisclosed company plans to distribute a new app. Ben buys 10,000 shares of AirLift stock. He reveals the company plans to Carly, who buys 5,000 shares. Carly tells Don, who tells Erwin, and each buys 1,000 shares. They know that Carly got her information from Ben. When AirLift publicly announces its new app, Ben, Carly, Don, and Erwin sell their stock for a profit.
-Refer to Fact Pattern 7-2. If Ben is liable under the Securities Exchange Act of 1934, it will be because the information on which he based his purchase of AirLift stock was​

Quizplus · Accepted Answer

Ben is liable because he traded on information that was not yet public, which is insider trading. The fact that the information was material and true are also important factors, but the most significant aspect is that it was not yet public. The information was not a forward-looking forecast but rather specific plans for the distribution of a new app.

Fact Pattern 7-2 Ben, an Accountant for AirLift, Inc., a Ride Service, Learns