INSIDER TRADING EXERCISE

Material Covered: “The Law of Insider Trading in a Peanut”

Total combined word limit on your answers to all questions: 500

OTHER INSTRUCTIONS AND ADVICE

1. Consulting sources during the exercise. While you are doing the exercise, you may consult:
• The other member of your team (if you are doing the exercise as part of a team);
• The readings for the course; and
• Any notes prepared personally by you or a team member.
You may NOT consult any other unpublished materials, or be in communication with any other person, electronically or otherwise. (You may consult any other published sources, including sources which are available to the general public on the internet, but since my evaluation of your answers will be based on the extent to which you show that you have mastered the assigned readings, consulting other sources is not likely to do you much good.)
2. Originality: Your answer must be in your own words, unless you use quotation marks and give a source. Do not copy (or copy with only a change in a word or two) material from the readings or any other source into your answer.
3. Focusing on the question: The exact question or questions to which you are to respond are set out in bold print, so they are hard to miss. Be sure to focus on the questions.         
4. Some general advice (READ THIS CAREFULLY): You are not supposed to be a lawyer, and I don’t expect you to have definite answers to legal questions. You are supposed to be a financial services professional with the ability to make a preliminary assessment of legal problems. Your answers should demonstrate your understanding of broad legal concepts, your ability to express those concepts (so use the language of the law), and your ability to spot where and how the law will have an impact on a business problem and the individuals involved. It will not be necessary to cite specific cases or statutes. Make sure that your answer focuses on how general legal principles apply to the facts you have been given. To the extent that the facts are not as specific as you would like them to be for your assessment, point that out. You shouldn’t concern yourself with implausible possibilities. I don’t try to “trick” people in these exams. Look for the main issues suggested by the facts, and get right to them. Be responsive in your answer; that is, answer the specific questions that have been asked from the perspective you have been asked to assume. (For example, if you are asked to provide some alternative courses of action, do so. If you are asked to assess risk from the perspective of a particular party, do that.) Your answers should be well-organized and clearly written. The length limit is tight, so you will probably have to edit your answers carefully to cover the necessary points in the limited space allowed. You can use bullet points if that is helpful.

These solutions may offer step-by-step problem-solving explanations or good writing examples that include modern styles of formatting and construction of bibliographies out of text citations and references. Students may use these solutions for personal skill-building and practice. Unethical use is strictly forbidden.

Elements to be established:
1. Whether or not I—in my capacity as an interviewee seeking employment when I overheard the non-public information—was a “constructive” or “temporary” insider. If I so qualified, I would be “subject to the same constraints on trading as an insider” (p. 7).
- Difficult to establish, because this stipulation usually...