Fact Pattern 37-3

question 42

Multiple Choice

Fact Pattern 37-3
Dhani, an accountant for Eureka, Inc., learns of undisclosed com?pany plan?s to market a new laptop. Dhani buys 1,000 shares of Eureka stock. He re?veals the company plans to Fay, who buys 500 shares. Fay tells Geoff, who tells Hu. Both Geoff and Hu buy 100 shares. They know that Fay got her informa?tion from Dhani. When Eureka publicly an?nounces its new laptop, Dhani, Fay, Geoff, and Hu sell their stock for a profit.
-Refer to Fact Pattern 37-3. Under the Securities Ex?change Act of 1934, Hu is most likely

• A) liable for insider trading.
• B) not liable because Hu is only a tippee, not a tipper.
• C) not liable because Hu is too far down the chain of disclosure.
• D) not liable because Hu traded on the basis of a true fact.

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Definitions:

James-Lange Theory

A hypothesis proposing that the initial response of physiological stimulation happens before one actually feels an emotion.

Snake

A long, legless, carnivorous reptile of the suborder Serpentes, known for its slithering movement and often venomous bite.

Frightened

Feeling afraid or anxious as a response to a perceived threat or danger.

Thalamus

Part of the limbic system located in the center of the brain, this structure relays sensory information from the lower part of the brain to the proper areas of the cortex and processes some sensory information before sending it to its proper area.