Sec
Under insider trading laws, if a corporate officer shares material nonpublic information with a friend who then trades on it, who can be held liable?
Insider trading: BOTH tipper AND tippee face liability.
Complete Analysis & Legal Rationale
Both the tipper (person who provides inside information) and the tippee (person who receives and trades on it) can be held liable for insider trading violations. The tipper breaches a duty of trust, and the tippee knowingly benefits from that breach.
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:
The tippee is also liable if they knew the information was material and nonpublic.
The tipper is also liable for providing the inside information.
Matches the verified teaching point in the explanation.
Liability does not depend on whether payment was made for the information.
Official Standard: Outline-level citation pending rule-specific upgrade. Verify against current FINRA materials.