The correct answer is D, An attorney who trades based on information obtained while providing services to a corporation. This is a classic example of insider trading, which involves trading securities based on material, nonpublic information (MNPI).
Step-by-step, insider trading rules prohibit individuals from using confidential information that is not available to the public to gain an unfair advantage in the market. Attorneys, accountants, and consultants are considered temporary insiders when they have access to such information through their professional roles. Trading on that information violates securities laws and fiduciary duties.
Choice A is not insider trading because the trade occurs after an earnings announcement, meaning the information is already public. Choice B is also not insider trading because trades made under a prearranged Rule 10b5-1 plan are permitted, even for insiders, as long as the plan was established when the insider did not possess MNPI. Choice C involves a violation of firm policy, but not insider trading, since it does not involve MNPI.
Thus, using confidential, nonpublic information obtained through a professional relationship to trade securities is illegal insider trading, making Answer D correct.
