Insider Trading MCQs

1. Insider trading refers to trading based on:
(A) Public news
(B) Confidential non-public information
(C) Technical analysis
(D) Random speculation

2. Insider trading is considered:
(A) Legal everywhere
(B) Illegal in most jurisdictions
(C) Always ethical
(D) Encouraged by regulators

3. Who is considered an “insider”?
(A) Company directors and officers
(B) Employees with confidential access
(C) Large shareholders with sensitive knowledge
(D) All of the above

4. Which regulatory body monitors insider trading in the US?
(A) SEC
(B) RBI
(C) IMF
(D) WTO

5. In Pakistan, insider trading is regulated by:
(A) SECP
(B) SBP
(C) FBR
(D) PMEX

6. Which of the following is an example of insider trading?
(A) Trading on published quarterly results
(B) Trading on leaked merger news
(C) Buying after analyst recommendations
(D) Selling after news reports

7. Which law in the US prohibits insider trading?
(A) Securities Exchange Act of 1934
(B) Companies Act 2017
(C) Trust Act 1925
(D) Trade Act 1970

8. Which of the following is a penalty for insider trading?
(A) Heavy fines
(B) Imprisonment
(C) Disqualification from directorship
(D) All of the above

9. Legal insider trading occurs when:
(A) Executives buy shares and disclose properly
(B) Employees secretly trade
(C) Politicians misuse power
(D) Friends share tips

10. Which of the following is NOT insider information?
(A) Pending merger announcements
(B) Published annual report
(C) Undisclosed earnings results
(D) Confidential takeover bids

11. Tipping in insider trading means:
(A) Giving investment advice based on research
(B) Sharing confidential information with others
(C) Disclosing financial ratios
(D) Rewarding stockbrokers

12. Who is a “tippee” in insider trading cases?
(A) The person sharing information
(B) The person receiving insider information
(C) The regulator
(D) The broker

13. Which is an ethical concern of insider trading?
(A) Unfair advantage
(B) Market manipulation
(C) Erosion of investor confidence
(D) All of the above

14. Insider trading damages markets by:
(A) Increasing volatility
(B) Reducing fairness
(C) Undermining trust
(D) All of the above

15. Which of the following may legally trade shares?
(A) Company directors after disclosing to exchange
(B) Employees using unpublished results
(C) Brokers with inside tips
(D) Politicians with confidential news

16. Which type of insider trading is punishable?
(A) Using material non-public information
(B) Trading on public news
(C) Trading based on technical charts
(D) Following analyst reports

17. Which country has strict penalties for insider trading?
(A) USA
(B) UK
(C) India
(D) All of the above

18. A common punishment for insider trading is:
(A) Confiscation of profit
(B) Ban from stock market
(C) Criminal charges
(D) All of the above

19. Insider trading creates which type of market?
(A) Fair
(B) Efficient
(C) Unequal and unfair
(D) Transparent

20. Which of the following can be considered insiders?
(A) Auditors
(B) Lawyers working with the company
(C) Investment bankers
(D) All of the above

21. Which principle is violated in insider trading?
(A) Transparency
(B) Equality
(C) Fairness
(D) All of the above

22. In insider trading, “material information” means:
(A) Irrelevant facts
(B) Information affecting stock price significantly
(C) Historical data only
(D) Old financial reports

23. Which of the following is a defense against insider trading charges?
(A) Trading based only on public information
(B) Written disclosure before trading
(C) No access to confidential data
(D) All of the above

24. Politicians using government knowledge for trading is called:
(A) Legal trading
(B) Political insider trading
(C) Speculative trading
(D) Ethical trading

25. Which practice strengthens investor confidence?
(A) Strict insider trading laws
(B) Market transparency
(C) Equal access to information
(D) All of the above

26. Which of these may detect insider trading?
(A) Abnormal price movements
(B) Sudden trading volume spikes
(C) Unusual timing of trades
(D) All of the above

27. Which system is used to monitor insider trading?
(A) Surveillance software by regulators
(B) Brokers’ daily reports
(C) Media alerts
(D) None of these

28. Insider trading is considered a:
(A) White-collar crime
(B) Violent crime
(C) Civil offense only
(D) Market speculation

29. Which of the following is a famous insider trading case?
(A) Martha Stewart case (USA)
(B) Raj Rajaratnam case (USA)
(C) Harshad Mehta case (India)
(D) All of the above

30. When is insider trading allowed?
(A) With proper disclosure to authorities
(B) If based on confidential data
(C) Always illegal
(D) When shared with friends

31. The main victim of insider trading is:
(A) Regulators
(B) Ordinary investors
(C) Stock brokers
(D) Company employees

32. Which type of insider trading is criminal?
(A) Trading before public release of results
(B) Trading after annual report published
(C) Trading after news media coverage
(D) Technical analysis trades

33. Who investigates insider trading in India?
(A) SEBI
(B) RBI
(C) IRDAI
(D) FICCI

34. Which act in India prohibits insider trading?
(A) SEBI Act 1992
(B) Companies Act 2013
(C) Contract Act 1872
(D) Banking Act 1949

35. In UK, insider trading is termed as:
(A) Market Abuse
(B) Legal trade
(C) Stock manipulation
(D) Shareholder privilege

36. Which of these is not a consequence of insider trading?
(A) Jail sentence
(B) Monetary fine
(C) Stock price fairness
(D) Loss of investor trust

37. Who can report insider trading?
(A) Regulators
(B) Whistleblowers
(C) Competitors
(D) All of the above

38. Whistleblowers exposing insider trading may receive:
(A) Rewards
(B) Protection
(C) Recognition
(D) All of the above

39. Insider trading violates which principle of stock markets?
(A) Level playing field
(B) Confidentiality
(C) Chart patterns
(D) Brokerage rules

40. Which is a preventive measure for insider trading?
(A) Trading window closure before results
(B) Strict disclosure requirements
(C) Surveillance by regulators
(D) All of the above

41. “Chinese Wall” in finance refers to:
(A) Barrier preventing misuse of insider info
(B) Trading in China
(C) Stock exchange in Asia
(D) Physical wall in banks

42. Employees are restricted from trading during:
(A) Silent period/blackout period
(B) Festivals
(C) Dividend declaration
(D) Stock splits

43. Which financial statement is sensitive insider information before release?
(A) Quarterly earnings report
(B) Published balance sheet
(C) Historical cash flow statement
(D) Auditor’s old report

44. Which of the following ensures fair disclosure of information?
(A) Regulation Fair Disclosure (Reg FD) in US
(B) Insider Protection Act
(C) Market Speculation Act
(D) Transparency Rule 2010

45. Which type of insider trading is difficult to prove?
(A) Informal tipping
(B) Publicly disclosed trading
(C) Broker recommendations
(D) Exchange-traded transactions

46. Which of the following practices promotes fairness?
(A) Equal access to financial reports
(B) Transparency in communication
(C) Disclosure of director trades
(D) All of the above

47. Which of the following is an unethical trading practice?
(A) Insider trading
(B) Front running
(C) Pump and dump
(D) All of the above

48. Who is responsible for preventing insider trading in a company?
(A) Compliance officer
(B) CEO
(C) Board of Directors
(D) All of the above

49. Insider trading weakens which aspect of capital markets?
(A) Investor confidence
(B) Market fairness
(C) Economic efficiency
(D) All of the above

50. The best way to prevent insider trading is:
(A) Strong regulation and enforcement
(B) No disclosure of information
(C) Encouraging secret trades
(D) Allowing selective trading