Investment Company and Variable Contracts Products Representative (Series 6)Practice Exam

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What is the criminal penalty for insider trading by corporations?

$5 million per violation
$10 million per violation
$25 million per violation
$50 million per violation

The correct answer is: $25 million per violation

The criminal penalty for insider trading by corporations is structured to reflect the seriousness of the offense and deter corporations from engaging in such practices. The limit of $25 million per violation is in place as a significant financial consequence for corporations found guilty of insider trading. This penalty is designed to emphasize the integrity of the securities markets and to reinforce that illegal trading practices, which undermine investor trust and market fairness, will incur serious repercussions. The penalties increase with the scale and impact of the offense, and this specific amount indicates Congress’s intention to impose substantial fines to discourage corporations from misusing nonpublic information. Understanding these penalties is crucial for those involved in securities markets, as they highlight the need for compliance and the importance of ethical conduct in investment practices.