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.

What is the theory behind the recovery of profits made by insiders?

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What potential liability do insiders face when trading within the six-month window?

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