sec

Question 1

SEC Rule 10b-5 Antifraud Rule MI - CREC

Answer 1

M – Material misrepresentation/omission
I – Intent (scienter)
C – Connection with purchase/sale
R – Reliance
E – Economic loss
C – Causation

Question 2

Classical Insider Trading

Answer 2

When actual insiders (officers, directors, employees) use material nonpublic info to trade.

• Buy before good news
• Sell before bad news

Question 3

Misappropriation Theory

Answer 3

A person commits fraud if they misappropriate confidential info from someone who trusted them, and trade on it.

Question 4

When you owe a duty of trust
under misappropriation theory

Answer 4

• You agreed to keep info confidential
• You have a history/pattern of sharing confidences
• Info comes from spouse, parent, child, or sibling

Question 5

Tippers violate 10b-5 if they:

Answer 5

• Get a personal benefit, or
• Give info as a gift to a friend/family member
• Even without money involved

Question 6

Tippees are liable if:

Answer 6

They know the info came from a breach of duty by the tipper.