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Pharmicon, Inc., a pharmaceutical firm, discovered a complete cure for the common cold. The medicine could be put into a pill that would be taken once a day for a week. Knowing these results, directors of Pharmicon decided to delay the press release and bought thousands of shares of Pharmicon stock. After the purchases, Pharmicon issued a press release about the pill. The price of the stock skyrocketed. When the SEC found out about the purchases and the delay in the press release, it sued Pharmicon for violating Rule 10b-5. The court in this case would most likely rule in favor of Group of answer choices

Sagot :

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Question Completion:

a. the SEC, because the information about the cure was material and was not disclosed to the public prior to the directors' purchase of the stock.

b.Pharmicon, because the information was not material.

c.the SEC, because owning company stock is a conflict of interest for the directors.

d.Pharmicon, because they issued a press release to the public

Answer:

Pharmicon, Inc.

The court in this case would most likely rule in favor of:

a. the SEC, because the information about the cure was material and was not disclosed to the public prior to the directors' purchase of the stock.

Explanation:

SEC's Rule 10b-5 forbids insider trading and, therefore, enables the SEC to sue individuals who use the privileged information they acquire about an entity's security to buy or sell the entity's securities.  The information may be acquired illegally or legally, provided it is not publicly available.  Insider trading exists when a professional breaches a fiduciary duty or betrays the trust and confidence reposed in him by trading on a security based on material, nonpublic information about the security.

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