Bobby is an employee of a publicly traded corporation, and holds stock and stock options. As a member of the product development team, he has been working on the design of a new product at the company. For its part, the company has been pinning most of its future economic hopes on the success of the release of the product. However, the development of the product has not gone public yet. The company is keeping the entire project a complete secret until it releases it publicly. The company has been so secretive about the new product that no one but Bobby knows the release date yet. When Bobby realizes this, he decides to use this information to profit heavily by purchasing as much stock as he can afford in the company right before the product goes public. Then, when the stock prices rise after the successful release of the product, he plans to sell it all.

1. What kinds of information are considered "material information" when discussing insider trading? Would the information Bobby used be considered material?
2. Suppose Bobby decides to share this information with his best friend Brenda so she can make some money, too. What is the tipper/tippee theory? In this case, who is the tipper and who is the tippee? Is Brenda guilty of insider trading too?
3. What are the penalties Bobby could face for insider trading?