Sec
An employee of a pharmaceutical company tells their friend about a pending FDA approval before the public announcement. The friend buys stock and profits. Who can be held liable for insider trading?
Both the tipper (employee who shared the information) and the tippee (friend who traded) can be held liable for insider trading. The employee violated their duty by sharing material, non-public information, and the frien
Complete Analysis & Legal Rationale
Both the tipper (employee who shared the information) and the tippee (friend who traded) can be held liable for insider trading. The employee violated their duty by sharing material, non-public information, and the friend violated the law by trading on it.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Does not match the governing securities rule described in the explanation.
Does not match the governing securities rule described in the explanation.
Matches the verified teaching point in the explanation.
Does not match the governing securities rule described in the explanation.
Official Standard: Secondary-market / antifraud framework including Section 10(b) (verify current text).
Official Standard: Outline-level citation: item maps to Series 7 topic coverage. Prefer a specific FINRA/SEC/MSRB rule citation in a later author pass.