Liability for Insider Trading under Rule 10b5

The video tutorial explains insider trading under Rule 10B5, focusing on the fiduciary relationship between a corporation and individuals. It details the liability of insiders who trade on non-public material information without disclosure, and the misappropriation of such information for personal gain. The tutorial also covers the liability of third parties who receive insider information, becoming temporary insiders, and the challenges in proving these liabilities.

What is the primary focus of insider trading under Rule 10B5?

• The fiduciary relationship between a corporation and an individual

• The relationship between two corporations

• The public's access to all company information

• The legality of all trading activities

What must an insider do to avoid liability when possessing non-public information?

• Ignore the information completely

• Sell all their shares

• Disclose the information to the public before trading

• Trade immediately to avoid suspicion

What is a key element of misappropriation by an insider?

• Transmitting information without expecting any gain

• Transmitting information for personal gain

• Transmitting information to a competitor

• Transmitting information to the public

Under what condition can a third party be considered a temporary insider?

• When they receive information from a public source

• When they are a shareholder of the company

• When they promise to keep received information secret

• When they trade without any prior knowledge

What makes it challenging to prove third-party liability under Rule 10B5?

• The absence of any trading activity

• The lack of any fiduciary relationship

• The knowledge elements about the fiduciary relationship and personal gain

• The public nature of the information