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Fact Pattern 22-1 Trudy Was Hired by Food Corporation to Handle a Products

question 54

Multiple Choice

Fact Pattern 22-1
Trudy was hired by Food Corporation to handle a products liability lawsuit brought against it alleging that it distributed dangerous dog biscuits. Trudy's investigation brought to light facts establishing that the biscuits were not defective and that the problem actually involved improper retention policies on the part of retailers. Trudy is aware that this information will result in the stock of Food Corporation increasing dramatically. Trudy immediately buys shares of Food Corporation and tells her fiancé, Frank, about the expected increase as well. Trudy tells Frank because she wants to borrow money from him for the trade and also because she believes that his investment will enable them to take a nicer honeymoon. Frank initially resists because of his training in business law and his concern that trading on the information would violate federal law, but he ends up going along with Trudy because he too wants a nice honeymoon. Trudy's suspicions come true. The lawsuit is dismissed, the stock increases dramatically, and she and Frank go on a great honeymoon. The day after they return, an investigator from U.S. Attorney's Office interviews her regarding her trades and those of Frank.
-Refer to fact pattern 22-1. Is there a basis upon which to hold Trudy liable for a securities violation for disclosing to Frank the information regarding the likely dismissal of the lawsuit?

Definitions:

NEMA Motors

Motors designed to meet standards set by the National Electrical Manufacturers Association, specifying performance and dimensional criteria.

Nine-lead

Refers to a specific wiring configuration often used in electric motors that allows for the connection of the motor to different voltages, enhancing its versatility.

Delta Connected Motor

A method of connecting a three-phase motor where the ends of each coil are connected in a triangle or delta configuration, allowing for the use of a high voltage network.

High Voltage

Refers to electric potential at a level high enough to pose a hazard to humans, typically classified as more than 1000 volts in alternating current (AC) or 1500 volts in direct current (DC).