Series 79 practice questionhardMNPI and Insider Trading
A director of a public company routinely shares confidential earnings information with his spouse, who never trades, but the spouse then tells her sibling, who trades. Who is potentially liable under tipper-tippee theory?
- AOnly the sibling who traded
- BOnly the spouse for passing the information
- CNo one, since the spouse did not trade
- DThe director, the spouse, and the sibling✓ Correct answer
Explanation
Why D — The director, the spouse, and the sibling
All parties who knowingly pass and use MNPI in a chain may be liable under tipper-tippee theory. The trap is focusing only on the trader, not the chain of disclosure.
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