Fact Pattern 41-1B
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 41-1B. Under SEC Rule l0b-5, Sid would not be li?able if he had waited to buy Tech stock until

Question

Fact Pattern 41-1B 
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 41-1B. 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 occurs when someone trades on material nonpublic information. In this case, Sid learned of the new video game before it was released, which qualifies as material nonpublic information. However, if Sid had waited to buy Tech stock until after the public release of the game, he would not have been trading on material nonpublic information and would not have violated SEC Rule 10b-5. Choices A, B, and D do not address the timing of the public release of the game and are therefore incorrect.