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.Under the Securities Ex-change Act of 1934,Geoff is most likely

Question

Quizplus · Accepted Answer

Geoff is most likely liable for insider trading because he bought the stock based on material, non-public information that he knew was obtained from an insider (Dhani). It does not matter whether he solicited the information or prevented others from profiting. The fact that he bought the stock and made a profit based on inside information is a violation of the Securities Exchange Act of 1934. The fact that he does not work for Eureka is also irrelevant.

Dhani,an Accountant for Eureka,Inc