Dhani,an accountant for Eureka,Inc.,learns of undisclosed com-pany plan-s to market a new laptop.Dhani buys 1,000 shares of Eureka stock.He re-veals the company plans to Fay,who buys 500 shares.Fay tells Geoff,who tells Hu.Both Geoff and Hu buy 100 shares.They know that Fay got her informa-tion from Dhani.When Eureka publicly an-nounces its new laptop,Dhani,Fay,Geoff,and Hu sell their stock for a profit.
-Refer to Fact Pattern 26-3.If Dhani is liable under the Securities Ex-change Act of 1934,it will be because the infor-mation on which he based his purchase of Eureka stock was

Question

Quizplus · Accepted Answer

Dhani bought the Eureka stock based on undisclosed company plans, which means the information was not yet public. This violates the Securities Exchange Act of 1934, which requires companies to disclose material information to the public in a timely manner. Therefore, Dhani is liable for insider trading. None of the other options (A, B, and D) are relevant in this case.

Dhani,an Accountant for Eureka,Inc