Question

usan is dating Mike, the CEO of a major drug company. One particular evening Mike seems very preoccupied. Concerned about his feelings, Susan asks what's wrong and he tells her that a major drug that the company was counting on has not been approved by the FDA. He further tells her that the announcement will be made at 10:00 am the next morning. At 9:00 am the next morning, Susan calls her broker and orders the sale of all of her stock in Mike's company. After the announcement, stock in Mike's company tumbles. By selling, Susan has saved over $69,000. Which of the following statements s true in this situation? Multiple Choice 0 Susan is a tree and will be liable for using insider information Susan is not a true insider so she has no t 0 Susan may use the formation however she is 0 only if she was thens 0 Susan islable only if the sale retain a short sung Drott 0 Scan scored the information Innocently to the hos nobility

Answer 1

Susan is a tippee and will be liable for using insider information.

Explanation:Insider means any person who is a connected person or in possession of or having access to unpublished price sensitive information.

Tippee is person who receives an insider information.

Susan is the fiancee of Mike and for the purpose of Prohibition of Insider Trade Regulations, she is presumed to be an immediate relative, and therefore she will be held liable for insider trading. (As she sold her stock in Mike's company and saved $69,000. But if she did not used such information, then also she will be held liable as per Prohibition of Insider Trade Regulations, if she didn't disclosed fact regarding insider information, this restriction and prohibition is just to maintain transperancy and to protect right of other stakeholders.