Paralegal Advanced Competency Exam (PACE) Practice Exam

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Study for the Paralegal Advanced Competency Exam (PACE). Utilize flashcards and multiple-choice questions designed to enhance your knowledge of paralegal standards and competencies. Prepare effectively and increase your chances of passing!

Practice this question and more.

Which term describes the act of someone using confidential information for trading?

Corporate restructuring
Insider trading
Market manipulation
Investment fraud

The correct answer is: Insider trading

The term that describes the act of someone using confidential information for trading is insider trading. Insider trading occurs when an individual trades a publicly-traded company's stock or other securities based on material, nonpublic information about the company. This can lead to an unfair advantage in the market, as these insiders can make informed trades that are not available to the general public, undermining the principle of transparency that is fundamental to fair trading practices. Insider trading is often illegal because it violates the trust and obligation that insiders have to the company's stakeholders. Legal regulations exist to prevent such practices and maintain market integrity. In contrast, the other terms provided do not accurately capture this specific activity. Corporate restructuring refers to the reorganization of a company's structure, market manipulation involves artificially inflating or deflating stock prices, and investment fraud encompasses a wide variety of deceitful practices aimed at profiting from investors. Each of these concepts relates to trading and finance, but they do not specifically address the misuse of confidential information in trading as insider trading does.