In 2005, Bettina opened Bettina Brownies in a shopping mall. The brownies were a hit and soon Bettina was operating shops in several malls in Illinois. By 2012 she had expanded operations to Indiana and she decided that it was time to finance expansion through the equity markets. With an investment banker, she prepared for the initial offering of Bettina Brownies. She sold 50,000 shares of stock

Question

at $10 a share. Expansion continued. Keebler determined that Bettina was a well-run company with an attractive financial position. It began secret negotiations with Bettina to buy her interest in the business. News of the negotiations leaked. Mr. Little, CEO of Keebler, denied that they were pursuing a deal with Bettina. A month later Bettina sold her share of the business to Keebler. Shortly before Bettina sold her interest to Keebler, Joe Kelso, a carpet cleaner was working at Bettina office when he overheard discussion of the sale to Keebler. Joe bought a large number of shares in Bettina. After the Keebler sale was completed, Joe sold his stock for a substantial profit. The SEC discovers that Joe Kelso made a lot of money on the sale of his stock in Bettina Brownies. Under what provision of the federal securities laws might Joe be prosecuted?
a. under Rule 10-K b. under Rule 10b-5 c. under Rule 8-K
d. under Rule 144A
e. under Regulation D

Answer 1

b