SIE practice questionhardInvestment Company Act of 1940
A mutual fund manager uses nonpublic information to trade for the fund’s benefit before that information is widely available. This practice is considered:
- AAllowed under Regulation S
- BLegal if it benefits shareholders
- CPermitted for closed-end funds
- DInsider trading and prohibited under the Investment Company Act✓ Correct answer
Explanation
Why D — Insider trading and prohibited under the Investment Company Act
Trading mutual fund assets based on nonpublic information is insider trading, illegal for all investment companies. Shareholder benefit and type of fund do not matter.
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