Paralegal Advanced Competency Exam (PACE) Practice Exam

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Prepare for the Paralegal Advanced Competency Exam with confidence. Enhance your knowledge with a range of quizzes, multiple choice questions, and detailed explanations. Equip yourself with the skills necessary to excel in your paralegal career!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

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What constitutes insider trading?

The purchase of stocks in public companies
The use of nonpublic information for trading shares
Buying shares during a market downturn
A public offering of corporate stock

The correct answer is: The use of nonpublic information for trading shares

Insider trading is defined as the act of buying or selling publicly-traded securities based on material, nonpublic information about the company. This type of information is not available to the general public and can significantly influence an investor's decision to buy or sell shares. The use of such confidential information gives an unfair advantage in the marketplace, leading to legal consequences for those involved, as it undermines investor confidence and the integrity of the markets. In this context, purchasing stocks in public companies does not constitute insider trading since it does not involve the use of confidential information. Similarly, buying shares during a market downturn and a public offering of corporate stock are both legitimate activities that take place in the marketplace and do not involve the misuse of nonpublic information. Thus, the choice that describes insider trading accurately relates to the use of nonpublic information for trading shares.