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:

Competitive Rival

Competitive Rival refers to a competitor within the same industry or market that offers similar products or services, challenging a firm's market share.

Holding Companies

Entities created to own the outstanding stock of other companies, controlling their policies and management.

Subsidiary

A company that is completely or partly owned and partly or wholly controlled by another company.

Ownership

The state or fact of owning something, which can involve possessing property, shares in a company, or any asset that grants the owner legal rights and responsibilities.