Cosmetic Profits. Sally is the vice president at Big Name Cosmetics Company. Through important and material nonpublic informatio
n, she learns that the company is soon going to purchase a smaller chain of stores. It is expected that stock in Big Name Cosmetics will rise dramatically at that point. Sally immediately buys a number of shares of her company's stock. She also tells her friend Alice about the expected purchases of stores. Alice wanted to purchase stock in the company but lacked the funds with which to do so. Although she did not have the funds in Bank A, Alice decided to draw a check on Bank A and deposit the check in Bank B and then proceed to write a check on Bank B to cover the purchases of the stock. She hoped that she would have sufficient funds to deposit before the check was presented for payment. Of which offense is Sally guilty, if any, in purchasing stock of the company?a. Insider tradingb. Tippingc. Insider misappropriationd. Extortione. She is guilty of no offense
The US Securities and Exchange Comission (SEC) defines illegal insider trading as "Buying or selling a secturity, in breach of a fiduciary duty or other relationship of trust and cofidence, on the basis of material, nonpublic information about the security".
Sally knew this imformation was non-public meaning this information was not available to the public, still she told Alice. Also she is an executive of the Company, and she benefit from the stock purchase, before the compnay´s purchase.
