Series 79 practice questionmediumMNPI and Insider Trading
Under Rule 10b-5, which party is most likely to face tipper liability in an insider trading case?
- AA retail investor who reads about a company in a public filing
- BAn executive who intentionally provides confidential merger details to a friend who trades on that information✓ Correct answer
- CA research analyst who issues a report based on public information
- DAn investor who purchases stock after reading a press release
Explanation
Why B — An executive who intentionally provides confidential merger details to a friend who trades on that information
The executive who intentionally discloses MNPI to a friend who trades is liable as a tipper under Rule 10b-5. The trap is misunderstanding that only the person trading is liable; both tipper and tippee can face liability.
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