Fact Pattern 21-3 (Questions 23-26 Apply)

question 13

Multiple Choice

Fact Pattern 21-3 (Questions 23-26 apply)
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 21-3. 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:

Activity

The engagement in tasks or actions, typically referring to some form of productive work or leisure actions.

Scarce Resources

Resources that are limited in supply and cannot satisfy all human wants and needs.

Standard Of Living

A level of material comfort in terms of goods and services available to someone or some group.

Market Failure

Market failure occurs when the allocation of goods and services by a free market is not efficient, often leading to a net social welfare loss.