Trading, Accounts & Prohibited ActsQuestion 294 of 398
Which situation is generally NOT illegal insider trading?
a.An investor trades based on his own analysis of publicly available earnings reports
b.A lawyer trades using confidential merger details from a client before the deal is public
c.An employee buys shares knowing of an unannounced FDA approval
d.A director tips a friend about undisclosed quarterly losses
Explanation
Trading on public information or one's own lawful research is legal. Insider trading requires trading on material nonpublic information in breach of a duty. The other choices all involve MNPI obtained or used improperly.
Law Reference: Securities Exchange Act of 1934Practice all 398 questions free — no signup required.
Related questions on this topic
- A representative learns that a customer with an individual account has died. What is the appropriate immediate action?
- Two unrelated investors each want their portion of a joint account to pass to their own heirs, not to each other, upon death. Which registration should they choose?
- When gathering information to make suitable recommendations for a new customer, which of the following is LEAST relevant to the customer's investment profile?
- What is the key difference between a CTR and a SAR?
- A representative has valid written discretionary authority accepted by the firm. She buys a suitable stock in the client's account without calling first. Is this a violation?
- The prohibition on 'selling away' exists primarily to ensure that:
Last reviewed: · editorial process
PrepPass Editorial Team · Verified against FINRA Securities Industry Essentials (SIE) Exam · How we review