Caroline is riding the elevator when she overhears two men talking about a proposed merger
It
seems that Strawberry Corporation is going to acquire all the stock of Maple Co Caroline asks
the two men what they are talking about, and they say that when this news becomes public,
Maple Co's stock will increase dramatically in price. They tell Caroline that this is private
information and that she is not to tell anyone. Caroline buys some Maple Co stock. Several
months later, after the merger is announced, Caroline sells her stock for a large profit. Assuming
all the information Caroline had was material, nonpublic information, which of the following
best describes Caroline's situation?
A) Caroline has violated no law, since she is not an insider.
B) Caroline has probably violated the 1933 Securities Act.
C) Caroline has violated no law, since she did not know the men she overheard.
D) Caroline has violated no law, because she had already heard the main points of the
information before asking about it.
E) Caroline has probably violated the 1934 Securities and Exchange Act.
E
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