Series 79 practice questionhardMNPI and Insider Trading
A hedge fund manager obtains MNPI about a merger from an investment banker at a conference, but the banker did not intend to disclose it. The manager trades on the information. Who is most likely liable?
- AOnly the investment banker, since the manager did not know it was MNPI
- BNeither party, since it was an unintentional disclosure✓ Correct answer
- CThe hedge fund manager, if he knew or should have known the information was confidential
- DBoth parties, regardless of intent
Explanation
Why B — Neither party, since it was an unintentional disclosure
On the stated facts, an accidental disclosure without a personal benefit does not establish the tipper's fiduciary breach required for tippee liability, and the manager is not alleged to owe or assume an independent duty of confidentiality. Merely recognizing information as confidential is not enough; additional facts could change the result.
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