Exam 22: Securities Fraud And Insider Trading

In relation to forward-looking statements,under the bespeaks caution doctrine,a court may determine that the inclusion of sufficient __________ in a document renders immaterial any misrepresentation or omission contained therein.

Which of the following is true regarding who can sue under Rule 10b-5?

__________ prohibits the practice of selective disclosure by issuers of publicly traded securities of material nonpublic information,such as advance warnings of earning results,to securities analysts or selected institutional investors before making full disclosure of the same information to the general public.

Section 16(a)of the 1934 Act requires that officers,directors,and greater-than-10% shareholders of companies that have registered any class of equity securities under the 1934 Act file __________ reports with the SEC and with any national securities exchange on which their company's equity securities are listed.

Which of the following is true regarding the state of mind needed in order to find a violation of Section 16(b)involving short-swing trading?

A company is not liable for hyperlinks to third-party information that the company has explicitly or implicitly endorsed or approved.

If a purchase or sale by an officer,director,or greater-than-10% shareholder that would otherwise result in recoverable short-swing profits was involuntary and did not involve the payment of cash and if there was no possibility of speculative abuse of inside information,than a court may hold that it was a(n)__________ to which no liability will attach.

Under what circumstances will reliance be presumed for purposes of establishing liability under Rule 10b-5?

In CASE 22.3 Halliburton Co.v.Erica P.John Fund,Inc.(2014),the U.S.Supreme Court considered the __________ theory,as well as the question a defendant in a securities fraud trial should be allowed to present evidence to challenge the __________.

Selby,an accountant and auditor with ABC Accounting,was auditing XYZ Company.Denali,the president of XYZ Company,told Selby that if the true condition of the company were exposed,Denali would certainly be fired.Denali is sure things can be turned around if Selby will only "help" out in the audit report.Selby agreed to include inaccurate numbers in the company's audit report knowing that the opinion would be included in the company's annual report on Form 10-K filed with the SEC.Unfortunately,Denali was not able to turn the company's performance around,and it went into bankruptcy later that year.Selby becomes aware that an investigation is being conducted.Which of the following is true regarding Selby's potential liability?

Which of the following is true regarding remedies available under Rule 10b-5?

The requirement that the defendant in a 10b-5 action have used interstate commerce,the mails,or a national securities exchange gives Congress the power to regulate the defendant's conduct under:

An employee who trades or tips using confidential information belonging to the employer can be liable under the Mail and Wire Fraud Acts.

Which of the following is NOT a requirement for a Rule 10b-5 violation?

A prediction about the future can be a misstatement under Rule 10b-5,but only if the person making the prediction does not believe it at the time.

According to Rule 10b-5,a company's silence or "no comment" to a rumor will make it liable,but only if the company has not previously spoken on the subject and insiders are not trading or tipping.

A fiduciary's undisclosed,self-serving use of a principal's information to purchase or sell securities,in breach of a duty of loyalty and confidentiality,defrauds the principal of the exclusive use of that information,but does not make the fiduciary an insider.

Drug Company X reports the introduction of a new pill that is guaranteed to result in weight loss with no side effects.The information was advertised in connection with a public offering of stock of the company's stock.Later,it becomes apparent through additional testing that unfortunately the new pill also results in premature hair loss,a material issue.Misha is the president of Company X and is pleased with sales of the drug but recognizes that the drug can no longer be advertised as having no side effects.Still,Misha does not believe any misrepresentations were made because Misha was not aware of the hair loss side effect when previous statements were made.Misha decides to do nothing.Is this decision correct as far as Rule 10b-5 is concerned?

The SEC itself has criminal enforcement power.

In Stoneridge Investment Partners,LLC v.Scientific-Atlanta,Inc.,the U.S Supreme Court analyzed the question of whether customer-supplier companies that agreed to arrangements allowing an issuer to mislead its auditor are liable in a private action under section 10(b)of the 1934 Act.The Court ruled that: