SCENARIO9

The SEC has filed the following Complaint. Upon review of the Complaint, what are the SEC's theories? If the SEC can prove the facts as alleged in its Complaint, can the defendants nonetheless prevail? Note that the names in this Complaint are fictitious.

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OHIO

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff

Vs.

DAVID Q. LOCKNER and CONRAD P. DILLARD

Defendants.

COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF

1. The Securities and Exchange Commission ("Commission" or "SEC") hereby files its complaint, and alleges the following:

SUMMARY

2. This matter involves insider trading in the securities of Littler Products Corporation ("Littler Products") by defendant Dillard, who eived tips directly or indirectly from defendant Lockner. Defendant Lockner was, at the time, in possession of material nonpublic infor- mation by virtue of his status as a member of Littler Products board of directors.

3. Lockner had knowledge of pending merger talks between Littler part of August 2010. In fact, the merger was discussed extensively Michigan in September 2010.

4. Lockner tipped Dillard about the pending merger between Littler Products and QP Synergy during the Michigan hunting trip that Lockner and Dillard both attended.

5. On September 18, 2010, the day Dillard returned from the hunting trip, he purchased 7,000 shares of Littler Products stock for approximately $165,000.

6. Dillard, who had no prior history of trading Littler Products shares, sold the only five stock holdings he held in his portfolio in order to purchase the Littler Products shares.

7. On September 25, 2010, Littler Products announced a definitive merger agreement with QP Synergy. Littler Products shares, which were then traded on the American Stock Exchange, increased in price by almost 60% on the news that day.

8. On October 3, 2010, Dillard sold all of his Littler Synergy stock for a profit of approximately $130,000.

9. Defendants Lockner and Dillard have engaged, and unle restrained and enjoined by this Court, will continue to engage in acts and practices which constitute and will constitute violations of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") [15 U.S.C. 78j(b)] and Rule 10b-5 there under [17 C.ER 240.10b-5]. JURISDICTION AND VENUE

10. The SEC brings this action pursuant to Sections 21(d) and 21(e) of the Exchange Act [15 U.S.C. SS 78u(d) and 78u(e)] to enjoin the defendants from engaging in transactions, acts, practices and courses of business alleged in this complaint, and transactions, acts, practices, and courses of business of similar purport and object, for

disgorgement of illegally obtained funds and other equitable relief, and for civil money penalties. This Court has jurisdiction of this action pursuant to Sections 21(d), 21(e), and 27 of the Exchange Act [15 U.S.C. SS 78u(d), 78u(e) and 78aa].

11. The defendants, directly and indirectly, have made use of the mails, the means and instruments of transportation and communication in interstate commerce, and the means and instrumentalities of interstate commerce, in connection with the transactions, acts, practices and courses of business alleged in this Complaint.

12. Venue lies in this Court pursuant to Section 27 of the Exchange Act [15 U.S.C. S 78aa] because the defendants reside within this district, and certain of the actions set forth herein occurred within the Northern District of Ohio.

WHEREFORE, Plaintiff Commission, respectfully prays that the Court:

I.

Make findings of fact and conclusions of law in accordance with Rule 52 of the Federal Rules of Civil Procedure.

II.

Issue a permanent injunction enjoining defendants Lockner, Dillard and their agents, servants, employees, attorneys, and all other persons in active concert or participation with them who receive actual notice of the order by personal service or otherwise, and each of them from violating Section 10(b) of the Exchange Act [15 U.S.C. 78j(b)) and Rule 10b-5 there under [17 C.F.R. 240.10b-5].

III.

Issue an Order requiring defendants Lockner and Dillard to dis- III. gorge all ill-gotten gains as alleged in the Commission's Complaint, plus pay prejudgment interest thereon.

IV.

Issue an Order requiring defendants Lockner and Dillard, pursuant and 78u-1], to pay civil monetary penalties. IV. to Sections 21(d)(3) and 21A of the Exchange Act [15 U.S.C. 78u(d)(3) and 78u-1], pay civil monetary penalties.

V.

Issue an Order that retains jurisdiction over this action in order to implement 1 carry out the terms of all orders and decrees that may have been entered or to entertain any suitable application or motion by the Commission for additional relief within the jurisdiction of this and Court.

VI.

Grant such other and further relief as may be necessary and appropriate.