Insider Trading Under Section 16 of the 1934 Act

The video tutorial explains Section 16 of the Securities Exchange Act, which mandates that insiders such as officers, directors, or significant shareholders register with the SEC. It highlights the requirement for insiders to register within a specific timeframe and the focus on short swing profits, which are profits made from trading within six months of becoming an insider. The tutorial discusses the concept of strict liability, where insiders are held accountable for profits made during this period, as these are presumed to be based on non-public information. The aim is to ensure transparency and protect the corporation and its shareholders.

Who is required to register with the SEC under Section 16?

• All shareholders of the corporation

• Any employee of the corporation

• Only the CEO of the corporation

• Officers, directors, or individuals owning 10% of shares

What is the primary focus of Section 16 regarding insider trading?

• Corporate governance policies

• Annual financial disclosures

• Short swing profits

• Long-term investment strategies

Within what time frame are profits considered 'short swing' under Section 16?

• One year

• Three months

• Six months

• Nine months

What is the theory behind reclaiming short swing profits for the corporation?

• Profits are used for corporate social responsibility

• Profits are based on public information

• Profits are likely based on non-public information

• Profits are shared equally among all employees

What type of liability does Section 16 impose on insiders for trading within the six-month window?

• Strict liability

• No liability

• Voluntary liability

• Conditional liability