Series 79 practice questionhardMNPI and Insider Trading
A director of Company X learns of a major development and tips a family member, who trades and then tells a neighbor who also trades. Under tipper-tippee liability, who can be held liable?
- AOnly the director
- BOnly the family member
- CDirector as tipper; family member and neighbor as tippees✓ Correct answer
- DOnly the neighbor
Explanation
Why C — Director as tipper; family member and neighbor as tippees
Tipper and all downstream tippees who knowingly trade on MNPI can be liable. The trap is limiting liability to only the first recipient or the director.
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