Chiarella Worked at a Company That Printed Financial Documents

question 115

Multiple Choice

Chiarella worked at a company that printed financial documents. In one documents, he read confidential information that allowed him to buy stock and make a nice profit because of his knowledge. When sued by the SEC for insider trading, the Supreme Court found Chiarella:

• A) guilty of violating Rule 10(b)-5 because he failed in his duty to disclose relevant information
• B) guilty of violating Rule 10(b)-5 because he traded in securities based on inside information
• C) guilty of violating Section 16(b) because he engaged in short-swing trading for profit
• D) guilty of securities fraud based on common law fraud
• E) none of the other choices

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Definitions:

Transaction Price

The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer.

Principal/Agent

A relationship in which one party (the agent) is authorized to act on behalf of another party (the principal) in conducting transactions.

Commission

A fee paid to an agent or employee for facilitating a sale or service, typically a percentage of the sale price.

Net Basis

A method of quoting or reporting prices without including the costs of taxes, delivery, and other ancillary charges.