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:

Employee Morale

The overall outlook, attitude, satisfaction, and confidence that employees feel at work.

Grapevine

An informal channel of communication within an organization, often characterized by the spread of rumors or unofficial information.

News Accounts

Reports or descriptions of recent events or facts, presented in newspapers, broadcasts, or online media.

Positive Impact

An effect or outcome that is beneficial or contributes positively to a situation or individual.