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Mr. Pesos is an outside counsel to Spectrum Electronics. Recently, Mr. Pesos learned that the company was on the brink of announcing a significant decline

Mr. Pesos is an outside counsel to Spectrum Electronics. Recently, Mr. Pesos learned that the company was on the brink of announcing a significant decline in expected revenue due to an unanticipated drop in one of Spectrum Electronics products. Over dinner, Mr. Pesos casually told his wife about this development. The next day, Mr. Pesos wife sold all her shares in Spectrum Electronics without the knowledge of Mr. Pesos. She avoided a significant loss because the next day Spectrum Electronics stock price dropped more than 35%. Which of the following is correct regarding a potential Securities & Exchange Commission (SEC) action?

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a. SEC can pursue insider trading because the stock price dropped more than 10%.

b. SEC can pursue insider trading because Mr. Pesos tipped his wife and violated his fiduciary duties.

c. SEC cannot pursue insider trading here because Mr. Pesos did not receive any benefit in return.

d. SEC cannot pursue insider trading because spousal privilege allows for spouses to talk freely to each other.

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