Insider Trading
Chapters in this video
- 0:00 Ivy the investor and the neighbor's hot tip
- 1:02 Material nonpublic information (MNPI) defined
- 1:47 Legal insider status versus illegal MNPI trading
- 2:48 Tipper-tippee liability chain reaction
- 3:58 Objective standard: should have known
- 5:05 Pre-planned written trading plan safe harbor
- 5:32 Treble damages and 20-year prison maximum
- 6:46 Controlling person liability and information barriers
- 7:37 Rapid-fire exam recap
What this video covers
- What material nonpublic information (MNPI) means, and why a reasonable person standard determines whether a tippee "should have known" the information was confidential
- Why being a corporate insider is legal but trading specifically based on MNPI violates the SEC antifraud rule, prosecuted under the same authority as market manipulation
- How tipper-tippee liability chains work, including why outsiders like taxi drivers or neighbors can be fully liable even without any corporate role
- Where duties of trust or confidence arise, from family relationships to confidentiality agreements to patterns of sharing secrets
- When a pre-planned written trading plan provides an affirmative defense, and why altering it to exploit new MNPI destroys that protection
- Why the SEC civil penalty is treble damages (3x profit gained or loss avoided), and why controlling persons including supervisors and firms face minimum $1 million penalties
- What information barriers (Chinese walls) require from broker-dealers, and why written supervisory procedures are mandatory rather than optional
Read the full lesson, free
This video's complete written lesson is free to read in the CertFuel app, no signup wall. The complete SIE course in the app is free too, including adaptive practice questions and spaced-repetition flashcards.