Tipping

An agent's cousin, a director at a public company, mentions over dinner that the company will announce a surprise merger next week. The agent neither trades nor tells anyone, but the next morning a customer coincidentally asks whether to buy that very stock. The agent should:

1. A.Tell the customer to wait a week without saying whyWrong. Coded steering still communicates and misuses the information.
2. B.Decline to make a recommendation on that stock and consult compliance, without revealing the informationCorrect. Abstention plus escalation is the only clean path.
3. C.Recommend the purchase, since the customer asked firstWrong-but-tempting. An unsolicited QUESTION does not authorize a recommendation infected by MNPI.
4. D.Buy the stock personally since the customer would have anywayWrong. Personal trading on MNPI is textbook insider trading.

Why: Using inside information to advantage anyone - including customers - violates the antifraud provisions; the agent must refrain from recommending the security while in possession of MNPI and should escalate to compliance, without disclosing the information. Citation: Uniform Securities Act Sec. 101; insider trading doctrine (misappropriation/tipping). Takeaway: with MNPI in hand - no trading, no tipping, no recommendations; escalate.

An agent's spouse regularly trades ahead of announcements after the agent shares confidential customer order flow and firm research over dinner. The agent has:

1. A.Violated rules only if he traded personallyWrong. TIPPING is its own violation - personal trading is unnecessary.
2. B.Done nothing; spouses share everything legallyWrong-but-tempting. Marital intimacy is not an information license - enforcement history is littered with spouse cases.
3. C.Unlawfully tipped confidential information and shares liability for the spouse's tradesCorrect. Tipper liability follows the information into the household.
4. D.Immunity because dinner conversation is privateWrong. Privacy of the channel never launders misuse of the content.

Why: Disclosing confidential customer and firm information to a trading family member breaches confidentiality duties and creates tipper liability for the resulting trades; regulators routinely reach household trading built on pillow-talk information. Citation: Uniform Securities Act Sec. 101; insider trading tipper/tippee doctrine. Takeaway: sharing secrets at home is tipping - the agent owns the spouse's trades.