Asked by Megan Beadle on May 20, 2024
Verified
As part of a stock offering for Design Media Corporation, the firm's accountant Eve intentionally misrepresents material facts in the prospectus. Fred buys the stock unaware of the misrepresentation and suffers a loss. Eve may be subject to
A) none of the choices.
B) job termination but no other sanctions, penalties, or liability.
C) a fine, imprisonment, and damages.
D) professional censure but no criminal sanctions or civil liability.
Prospectus
A formal document that companies must publish before issuing public stock, detailing the investment offering and associated risks.
Misrepresentation
A false statement or lie that deceives, misleads, or distorts the truth, potentially resulting in legal action.
Job Termination
The end of an employee's tenure with an employer, which can be voluntary (resignation) or involuntary (dismissal or layoffs).
- Recognize the essentiality of disclosing information accurately in the registration procedure and the outcomes of inaccuracies.
- Analyze the repercussions of failing to comply with securities legislation, including prospective fines and liabilities.
Verified Answer
JD
Jacob DelagarzaMay 24, 2024
Final Answer :
C
Explanation :
Eve's intentional misrepresentation of material facts in the prospectus constitutes securities fraud, which can lead to severe penalties including fines, imprisonment, and the requirement to pay damages to those harmed by the fraudulent actions, such as Fred.
Learning Objectives
- Recognize the essentiality of disclosing information accurately in the registration procedure and the outcomes of inaccuracies.
- Analyze the repercussions of failing to comply with securities legislation, including prospective fines and liabilities.