Dino, a director of LetsGo Inc., purchases 100 shares of the company at $100 per share on 5th January 2011 and sells them on 15th February at $110 per share. Because the shares were bought and sold within a six-month period, Dino will have to return the $1,000 profit to the company under the _____ rule.

Question

Quizplus · Accepted Answer

The scenario described reflects the short-swing profit rule under Section 16(b) of the Securities Exchange Act of 1934. This rule requires corporate insiders, such as directors, to disgorge any profits made from buying and selling their company's stock within a period of less than six months. This is to prevent insider trading and unfair use of privileged information. Therefore, Dino would have to return the $1,000 profit to the company under this rule.

Dino, a Director of LetsGo Inc