Pablo (an Australian citizen and recent MBA graduate from an USA Ivy league university) is in his fifth month working as an Associate at Top Investment Bank (“TIB”) in New York City. He is working on a merger/acquisition transaction involving “Amazing American Chicken Inc.” (“AAC” - an US publicly traded company on the New York Stock Exchange), and “Awesome Australian Beef Ltd.” (“AAB” - an Australian incorporated company publicly traded on the New York Stock Exchange). Pablo works from home on Mondays, and one day his girlfriend, Fiona, while assisting the house maid cleaning the study, accidently saw on Pablo’s computer screen details about the merger/acquisition. Fiona’s biological father (but divorced from her biological mother) is the CEO of AAB. Fiona was shocked to see that her father could be out of the job and if so, this will trigger a clause in the family trust fund which will result in the end of the generous stipend she receives. Fiona, in a panic, Group FaceTime call her stepbrothers, Sam (Retail Stock Trader, living in Sydney, Australia) and John (Financial Advisor, living in Los Angeles, USA) and told them of what she saw and that their stipend may end also. Sam purchased US$50,000 shares of AAC. John purchased US$50,000 shares of AAB. 9 months later, Sam sold his AAC shares for 2X the purchase price and John sold his AAB shares at the same time for 4X the purchase price. Flag question: Question 19Question 190.21 ptsWho is/are likely or may be liable for insider trading under US Law? (select all, if any, that apply)Group of answer choicesFionaSamPabloJohnAACTIBAAB Flag question: Question 20Question 200.21 ptsWho is/are likely or may be liable for insider trading under Australian Law? (select all, if any, that apply)Group of answer choicesJohnPabloAABSamAACTIBFiona
Question
Pablo (an Australian citizen and recent MBA graduate from an USA Ivy league university) is in his fifth month working as an Associate at Top Investment Bank (“TIB”) in New York City. He is working on a merger/acquisition transaction involving “Amazing American Chicken Inc.” (“AAC” - an US publicly traded company on the New York Stock Exchange), and “Awesome Australian Beef Ltd.” (“AAB” - an Australian incorporated company publicly traded on the New York Stock Exchange). Pablo works from home on Mondays, and one day his girlfriend, Fiona, while assisting the house maid cleaning the study, accidently saw on Pablo’s computer screen details about the merger/acquisition. Fiona’s biological father (but divorced from her biological mother) is the CEO of AAB. Fiona was shocked to see that her father could be out of the job and if so, this will trigger a clause in the family trust fund which will result in the end of the generous stipend she receives. Fiona, in a panic, Group FaceTime call her stepbrothers, Sam (Retail Stock Trader, living in Sydney, Australia) and John (Financial Advisor, living in Los Angeles, USA) and told them of what she saw and that their stipend may end also. Sam purchased US50,000 shares of AAB. 9 months later, Sam sold his AAC shares for 2X the purchase price and John sold his AAB shares at the same time for 4X the purchase price. Flag question: Question 19Question 190.21 ptsWho is/are likely or may be liable for insider trading under US Law? (select all, if any, that apply)Group of answer choicesFionaSamPabloJohnAACTIBAAB Flag question: Question 20Question 200.21 ptsWho is/are likely or may be liable for insider trading under Australian Law? (select all, if any, that apply)Group of answer choicesJohnPabloAABSamAACTIBFiona
Solution
Question 19:
Under U.S. law, insider trading is typically defined as buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security.
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Fiona: Fiona could potentially be liable for insider trading. She saw confidential information about a merger/acquisition and shared it with her stepbrothers.
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Sam: Sam could potentially be liable for insider trading. He used the information he received from Fiona to make a profit by buying and then selling shares of AAC.
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John: John could potentially be liable for insider trading. He used the information he received from Fiona to make a profit by buying and then selling shares of AAB.
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Pablo: Pablo himself may not be liable for insider trading as he did not trade any shares based on the information he had. However, he could be held responsible for not securing the information properly.
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AAC, TIB, AAB: These entities are not likely to be liable for insider trading in this scenario unless it can be proven that they knowingly shared insider information.
Question 20:
Under Australian law, insider trading is also illegal. The laws are similar to those in the U.S., but there may be some differences in enforcement and interpretation.
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John: John could potentially be liable for insider trading under Australian law as he used insider information to trade shares and make a profit.
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Pablo: Pablo may not be liable for insider trading under Australian law as he did not trade any shares based on the information he had. However, he could be held responsible for not securing the information properly.
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AAB, AAC, TIB: These entities are not likely to be liable for insider trading in this scenario unless it can be proven that they knowingly shared insider information.
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Sam: Sam could potentially be liable for insider trading under Australian law as he used insider information to trade shares and make a profit.
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Fiona: Fiona could potentially be liable for insider trading under Australian law. She saw confidential information about a merger/acquisition and shared it with her stepbrothers.
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