Asked by Leslie Alaniz on May 08, 2024
Verified
Cath is an accountant with Discount Corporation. Efrem buys Discount stock and loses money on the investment. To recover from Cath under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, Efrem must prove
A) only the purchase and sale of a security.
B) fraud, reliance, materiality, and lack of knowledge about securities.
C) fraud, reliance, materiality, and incompetence.
D) fraud, reliance, materiality, causation, and scienter .
Scienter
A legal term referring to the knowledge of wrongdoing, especially with intent to deceive or defraud.
Securities Exchange Act
A U.S. federal law regulating the trading of securities, such as stocks and bonds, in order to protect investors from fraudulent practices.
Fraud
A deliberate deception to secure unfair or unlawful gain.
- Comprehend the legal obligations and duties of accountants pursuant to the Securities Exchange Act of 1934 and the Securities Act of 1933.
- Determine the circumstances in which accountants may face liability for fraudulent activities and misstatements in financial disclosures.
Verified Answer
AO
Ariana O’CallaghanMay 13, 2024
Final Answer :
D
Explanation :
To recover under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, Efrem must prove fraud, reliance, materiality, causation, and scienter. Scienter refers to a defendant's knowledge of the wrongfulness of an act or omission, which is a crucial element in securities fraud cases.
Learning Objectives
- Comprehend the legal obligations and duties of accountants pursuant to the Securities Exchange Act of 1934 and the Securities Act of 1933.
- Determine the circumstances in which accountants may face liability for fraudulent activities and misstatements in financial disclosures.