Salman Received Information About Stocks from Michael Kara, His Future

question 109

Multiple Choice

Salman received information about stocks from Michael Kara, his future brother-in-law, who received inside information from Michael's brother, Maher Kara, who worked at Citigroup's investment banking group. Salman and Michael made numerous identical trades and earned significant income. Michael confessed to federal investigators. Salman was convicted of insider trading but contended that he was an innocent tippee who did not receive information directly from Maher who provided the tips and that Maher did not know he was receiving the information. The appeals court held that there was:

• A) ​no evidence that Maher knew that either Michael or Salman was using the information, so there was no intent to engage in insider trading.
• B) ​no evidence that Maher knew that Michael was passing information to Salman, so Salman was an innocent tippee.
• C) ​evidence that Maher knew Michael was using the information but no evidence that he knew Salman obtained the information, so Salman was an innocent tippee.
• D) ​evidence that Micheal hid the source of the information, so Salman thought he was lucky or smart.
• E) ​none of the other choices are correct.

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Definitions:

Standard Cost

A predetermined cost of manufacturing a single unit or a number of product units during a specific period under normal conditions.

Variable Overhead

Costs that vary with production volume, such as utilities or materials, which do not remain fixed over time.

Cost Driver

A factor that causes the cost of an activity to increase or decrease, such as machine-hours, labor hours, or production volume.

Budget Variance

The difference between the budgeted or planned amount of expense or revenue, and the actual amount incurred or earned.