Asked by Andrés Tomas on May 22, 2024
Verified
Ewan, the chief executive officer of Furniture Inc., intentionally understates the amount of the firm's debts in information provided to investors as part of an issue of stock. Gary buys the stock and suffers a loss. Ewan may be subject to
A) government prosecution and a private investor's suit.
B) negative publicity but no criminal prosecution or civil suit.
C) only government prosecution.
D) only a private investor's suit.
Government Prosecution
The process by which a governmental authority charges an individual or entity with a crime and pursues formal charges in a court of law.
Private Investor's Suit
Legal action initiated by a private investor rather than a regulatory agency, typically involving securities fraud or violations of securities laws.
- Comprehend the critical role of disclosure in the course of registration and the impacts of providing misleading information.
- Evaluate the consequences of not adhering to securities regulations, including possible penalties and responsibilities.
Verified Answer
SW
snehal waghmareMay 22, 2024
Final Answer :
A
Explanation :
Ewan's intentional understatement of the firm's debts to investors constitutes securities fraud, which can lead to both government prosecution (for violating securities laws) and a private investor's suit (for the losses suffered due to the fraudulent information provided).
Learning Objectives
- Comprehend the critical role of disclosure in the course of registration and the impacts of providing misleading information.
- Evaluate the consequences of not adhering to securities regulations, including possible penalties and responsibilities.