Asked by Juliana Quintero on May 11, 2024
Verified
Wallace was also charged under Section 15 of the Securities Act. He asserted an affirmative defense claiming he is not liable as he is not a "controlling person" under that statute. Is he correct?
A) No, because members of a board of directors can only be considered "controlling persons" if they had responsibility for due diligence.
B) No, as chairman of the board of directors, he is a "controlling person".
C) Yes, because he is not an accountant or other financial expert.
D) Yes, even though he was chairman of the board, he did not control the content of the registration statements.
E) Yes, if he did not have ultimate responsibility to conduct due diligence.
Securities Act
A federal piece of legislation enacted in 1933 that regulates the offer and sale of securities to protect investors from fraud.
Controlling Person
An individual or entity that has the power to direct or influence the management and policies of a company, typically through ownership of a significant portion of voting shares.
Affirmative Defense
A defendant’s response to a plaintiff’s claim in which the defendant attacks the plaintiff’s legal right to bring the action rather than attacking the fact of the claim or making excuses for unlawful behavior. Common
- Comprehend the precise legal criteria and defenses available to accountants under securities legislation.
Verified Answer
PW
Phyllis WaruguruMay 17, 2024
Final Answer :
B
Explanation :
As chairman of the board of directors, Wallace is considered a "controlling person" under securities laws, which makes him potentially liable for misrepresentations in the company's SEC filings, regardless of his direct involvement in preparing those documents.
Learning Objectives
- Comprehend the precise legal criteria and defenses available to accountants under securities legislation.