Question

Seimone, an auditor for the ABC accounting firm, learns that her audit client, Bupkis Co., is about to announce a record profit. She buys Bupkis shares in a fake name and profits upon the public announcement. Which of the following is true?

A) Seimone is eligible for a bonus from her accounting firm.
B) Seimone's actions are ethically justified.
C) Seimone may face criminal charges from the SEC.
D) The SEC may bring civil charges against Seimone.

Answer 1

C) Seimone may face criminal charges from the SEC.

Step-by-step explanation:

The correct answer is C) Seimone may face criminal charges from the SEC.

Insider trading, which is the illegal practice of trading stocks based on material, non-public information, is a serious offense. Seimone's action of buying shares in a fake name and profiting from the public announcement of Bupkis Co.'s record profit falls under the category of insider trading. The Securities and Exchange Commission (SEC) is responsible for enforcing securities laws in the United States, and they consider insider trading a criminal offense.

Seimone's actions are not ethically justified, as it involves taking advantage of privileged information to make personal gains. Additionally, receiving a bonus from her accounting firm (option A) would also be unethical since her actions are illegal. Option D is also incorrect because the SEC would bring criminal charges against Seimone rather than civil charges.