Series 63 practice questionhardProhibited Practice: Insider Trading
Under the USA, which of the following is an example of prohibited insider trading?
- AAn agent using a public press release to make recommendations
- BAn agent trading on confidential, nonpublic merger information✓ Correct answer
- CA client making trades based on financial news sources
- DAn agent recommending securities based on published analyst reports
Explanation
Why B — An agent trading on confidential, nonpublic merger information
Trading on confidential, material nonpublic information is insider trading, prohibited under Section 501. Use of public information (A, C, D) is not insider trading.
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