Fact Pattern 37-3
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. Both Geoff and Hu buy 100 shares. They know 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 37-3. Under the Securities Ex?change Act of 1934, Fay is most likely

Question

Fact Pattern 37-3 
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. Both Geoff and Hu buy 100 shares. They know 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 37-3. Under the Securities Ex?change Act of 1934, Fay is most likely

Quizplus · Accepted Answer

Fay is most likely liable for insider trading because she bought stock based on material nonpublic information obtained from Dhani. It does not matter whether she prevented others from profiting or solicited information from Dhani, as these factors are not relevant to determining liability for insider trading. Additionally, Fay's employment status is not relevant, as anyone can be liable for insider trading regardless of whether they work for the company whose stock is at issue.