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, Geoff 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, Geoff is most likely

Quizplus · Accepted Answer

Geoff is most likely liable for insider trading because he purchased stock based on non-public information that he knew was disclosed by Dhani, who had a duty to keep the information confidential. It does not matter whether Geoff solicited the information or prevented others from profiting, or whether he worked for Eureka or not. The Securities Exchange Act of 1934 prohibits insider trading by anyone who trades securities based on material non-public information obtained from someone who has a duty to keep the information confidential.