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IAI Actuarial Core Principles · Business Management · Separate legal personality, directors' duties, shareholders and partnerships

Ms Iyer, a director of Kaveri Insurance Ltd, learns in a board meeting of a planned acquisition. She buys shares in the target through a relative before it is announced and profits. Which statement best describes her position?

Ms Iyer has misused her position and confidential information for personal gain, which breaches her directors' duties and may also bring securities-law consequences. Using a relative's name or resigning later does not remove the breach.

  1. AShe is safe provided the shares were bought in her relative's name
  2. BShe is safe provided the company itself did not trade in the shares
  3. CShe has misused her position and confidential information, breaching her duties, and may face consequences beyond company lawCorrect
  4. DShe has acted properly provided she resigns later
  5. She has breached only the duty to attend meetings

Explanation

Using confidential board information for personal gain breaches the duty not to achieve undue gain from the position. Trading through a relative does not remove the breach, and insider trading rules may also apply. Later resignation does not undo it.

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