Fact Pattern 42-2A (Questions A13-A14 apply)
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,each of whom buy 100 shares.They knows 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 42-2A.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 is liable under the Securities Exchange Act of 1934 because the information on which he based his purchase of Eureka stock was not yet public, and he disclosed it to others who also bought the stock based on that non-public information. This is insider trading, which is illegal under federal securities laws. The fact that the information was material, forward-looking, or not yet true is not relevant to his liability in this case.

Fact Pattern 42-2A (Questions A13-A14 Apply)