Question

Sally overhears a phone conversation in an elevator of her office building in N.Y.C. discussing top secret financial matters regarding a corporation. After hearing the conversation, she believes she has a strong basis to make a lot of money, so she buys a ton of the company's stock after hearing this inside information. Can Sally be held liable for insider trading?
(A) Yes, under the misappropriation theory.
(B) No, she is not an insider.
(C) Yes, she is a tipper.
(D) Yes, but only if she is in some way affiliated with the company.
(E) No, she is a statutory insider.

Answer 1

Answer:

A. Yes, under the misappropriation theory

Explanation:

The misappropriation theory postulates that if someone uses insider information in trading securities has committed securities fraud against the information source