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
- CThe hedge fund manager, if he knew or should have known the information was confidential✓ Correct answer
- DBoth parties, regardless of intent
Explanation
Why C — The hedge fund manager, if he knew or should have known the information was confidential
The hedge fund manager can be liable if he knew or should have known the information was MNPI, regardless of the banker's intent. The trap is assuming liability requires intentional disclosure.
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