What constitutes a key factor in determining liability for insider trading?

The correct answer focuses on the materiality of the inside information as a key factor in determining liability for insider trading. Materiality refers to whether the information in question would be considered important to a reasonable investor making decisions about buying or selling securities. If the information has the potential to influence an investor's decision, it is considered material.

In the context of insider trading laws, trading on non-public, material information is illegal, as it undermines the principles of fairness and transparency in the financial markets. If someone trades based on information that is deemed material, they can be held liable for insider trading, as it provides an unfair advantage over other investors who do not have access to that information.

The significance of materiality is emphasized by regulatory bodies, which assess the facts and circumstances around information to determine if it meets the threshold of being material. If the information would impact a company's stock price or the likelihood of achieving various business objectives, it constitutes a breach of fiduciary duty and can lead to legal repercussions for the individual involved. Thus, understanding materiality is essential for accurately evaluating insider trading cases and ensuring compliance with securities law.