In a case of insider trading, who may be held liable when material non-public information is shared?

In cases of insider trading, liability can extend to multiple parties when material non-public information is shared. Specifically, both the person providing the information (in this case, Jim) and the individual who receives that information (the neighbor) can be held liable if certain conditions are met.

For liability to occur, the person sharing the information must have a duty, often fiduciary, to keep that information confidential, and the recipient must know or should have known that the information was obtained in breach of that duty. This means that if Jim, having access to material non-public information, shares that with the neighbor, both parties may face legal consequences. Jim can be held accountable for insider trading for disclosing the information, while the neighbor might also be liable for trading on that information, benefiting from Jim's breach of duty.

This dual liability reinforces the principle that both the source of the insider information and those who act upon it can be culpable, thus promoting accountability in the use and sharing of sensitive information in financial markets.