Fact Pattern 41-1A
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 41-1A. 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

Fact Pattern 41-1A 
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 41-1A. 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

Quizplus · Accepted Answer

Dhani is liable under the Securities Exchange Act of 1934 because he made his purchase based on non-public, material information about Eureka's plans for a new laptop. The fact that the information was not yet public makes it insider information and purchasing stock based on insider information is illegal. Therefore, option C is correct.