While Auditing the Financial Statements of Merlyn Company,Arturo Artinez Discovers

question 11

Essay

While auditing the financial statements of Merlyn Company,Arturo Artinez discovers nonpublic,confidential information that Merlyn's earnings will be larger than earlier projected.Arturo informs his sister Selena about this,telling her,"You can make a lot of money using this information because it isn't public yet.Be discreet,however,because I'm not supposed to give you this information." Selena uses the information to purchase 20,000 shares of Merlyn.Three weeks later when,Merlyn releases the financial statements showing its actual earnings,the price of its shares rises and Selena earns a $120,000 profit.Has Selena violated Rule 10b-5 of the Securities Exchange Act?

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Definitions:

Knowledgeable Managers

Managers who possess a deep understanding of their industry, company, and the roles of their team members.

Research And Development

A business or government activity that focuses on the discovery of new knowledge and its application to developing new or improved products or processes.

Self-Leadership

The idea that all organizational members are capable of leading themselves, at least to some extent.

Political Skill

The ability to understand and navigate interpersonal and organizational dynamics effectively to achieve goals or influence outcomes.