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Section 16(b) of the Securities Exchange Act of 1934 imposes strict liability on insiders whose purchases and sales of securities result in “short-swing profits,” i.e., profits realized from the purchase and sale (or sale and purchase) of a company’s shares within a six-month period. “Insiders” include directors, officers and “beneficial owners” of more than 10 percent of a company’s registered securities—namely, persons who exercise voting or investment control over, and hold a pecuniary interest in, more than 10 percent of a company’s registered securities. Section 16(b) aims to prevent these insiders from engaging in speculative transactions on the basis of information not available to others.

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