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. Regarding Sid's profits on the purchase and sale of Tech stock, under Section 16(b) of the Securities Exchange Act of 1934 Tech may recapture

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. Regarding Sid's profits on the purchase and sale of Tech stock, under Section 16(b) of the Securities Exchange Act of 1934 Tech may recapture

Quizplus · Accepted Answer

Under Section 16(b) of the Securities Exchange Act of 1934, any profit made by an insider (such as a director) on the purchase and sale of company stock within a six-month period is considered "short-swing profit" and can be recaptured by the company. In this case, Sid purchased and sold Tech stock within a three-week period, making a profit on insider knowledge of the new video game. Therefore, Tech may recapture all of Sid's profits.