David was the president of Scholastic Book Fairs, Inc. He explained to his wife that the price of Scholastic stock that was included in his statement of assets reflected a $10-per-share decline in value, due to an unfavorable earnings report. Scholastic was going to announce the information in a week. At her husbands request, Mrs. Yun agreed not to disclose the information to anyone except her lawyer.

Two days before the announcement, Mrs. Yun phoned her lawyer from her real estate office and told him the news. Her colleague, Jerry, overheard the price discrepancy. That evening at an event, Mrs. Yun and Jerry discussed the earnings report. The next morning before the announcement, Jerry placed an order to buy $20,000 of two day puts. The stock price dropped 40% in response to the news and Jerry profited more than $250,000. Jerry is ______________________.

A. guilty of misappropriation if the government can show that Mrs. Yun as an outsider benefited from the tip she gave to Jerry B. not guilty of misappropriation if the government fails to show fraud-on-the-market C. guilty of classical insider trading D. none of the above