Cam, an Accountant for Discount Inc

question 33

Multiple Choice

Cam, an accountant for Discount Inc., learns that the company's soon-to-be-announced quarterly sales figures exceed analysts' expectations. Cam tells Ed, who tells Frye, who buys 100 shares of the company's stock. Frye knows that Ed got the information from Cam. When Discount publicly announces the figures, Frye sells the stock for a profit. Under the Securities Exchange Act of 1934, Ed is most likely

• A)liable for insider trading.
• B)not liable because Ed did not prevent others from profiting.
• C)not liable because Ed did not misappropriate any information.
• D)not liable because Ed does not work for Discount.

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Definitions:

Dividend Amount

The sum of money paid regularly by a company to its shareholders out of its profits (or reserves).

Preferred Stock

A type of stock that provides dividends before any dividends are provided to common stockholders, often with fixed rates.

Par Value

The face value of a bond or stock, as specified by the issuing company, which does not necessarily reflect its market value.

Legal Capital

The minimum amount of capital that a company is required to maintain for the protection of its creditors.