Fact Pattern 37-2
Sid, a director of Tech Software Company, learns that a Tech engineer has developed a new, exciting video game. Sid buys Tech stock and tells his friend Uri, who also buys Tech stock. When the new game is released three weeks later, Sid and Uri sell their stock for a big profit.
-Refer to Fact Pattern 37-2. Under SEC Rule l0b-5, Sid would not be li?able if he had waited to buy Tech stock until

Question

Fact Pattern 37-2 
Sid, a director of Tech Software Company, learns that a Tech engineer has developed a new, exciting video game. Sid buys Tech stock and tells his friend Uri, who also buys Tech stock. When the new game is released three weeks later, Sid and Uri sell their stock for a big profit.
-Refer to Fact Pattern 37-2. Under SEC Rule l0b-5, Sid would not be li?able if he had waited to buy Tech stock until

Quizplus · Accepted Answer

SEC Rule 10b-5 prohibits insider trading, which includes buying or selling securities based on material nonpublic information. In this case, Sid had material nonpublic information about the new game, which he used to make a profit by buying Tech stock before the public release. If Sid had waited until after the public release of the game to buy Tech stock, he would not have been utilizing material nonpublic information and would not have violated SEC Rule 10b-5.