Who is liable if someone uses insider information received from a company board member?

The correct response indicates that both the board member who disclosed the insider information and the investor who acted upon it can be held liable under securities laws. This principle is rooted in the concept of "insider trading."

When a board member shares non-public, material information about the company, they breach their fiduciary duty. This unauthorized disclosure is considered unlawful because it gives an unfair advantage to the recipient over other investors who do not have access to that information. Therefore, the board member can be held responsible for providing the insider information.

On the other hand, the investor who receives and acts on that insider information is also liable, as they are considered a "tippee." The concept of "tippee liability" establishes that even though the investor may not have committed the original violation, they have profited from information that was obtained improperly. Thus, both parties are complicit in the violation of securities laws, highlighting the importance of transparency and fairness in financial markets.