Which of the Following Situations Would Be Considered Insider Trading

question 304

Multiple Choice

Which of the following situations would be considered insider trading?

• A) You open the morning paper and read that Sun Microsystems has a new CEO, who plans to bring in his own team. You decide to call your broker and buy shares of Sun Microsystems.
• B) Your Uncle Jerry works for Microsoft and sends you a news release put out by the company that talks about the acquisition of a Chinese company. You believe this will significantly boost Microsoft revenues so you buy 200 shares through an online service.
• C) You call your stockbroker and ask him to buy 500 shares of your company, Best Dressed Computers, Inc., because you just heard from the CEO's administrative assistant that the CEO just got the boot! You figure that this emotional news has got to help the stock price.
• D) Your stockbroker calls and recommends that you diversify your portfolio with a few shares of SLB [Schlaumberger] because SLB's request through the FTC and several international trade commissions to finalize the purchase of two oil companies was successful. You act on this information.

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Definitions:

Free Trade Areas

Regions in which a group of countries have agreed to reduce or eliminate trade barriers among themselves.

Exporting Nation

A country that sends goods or services to another country for sale.

Trade Deficit

Occurs when a country's imports exceed its exports during a specific time period, leading to a negative balance of trade.

Trade Deficit

A state where the amount of goods and services brought into a country is higher than the amount sent out, leading to an adverse balance of trade.