Question

Mary Chen purchased shares of Fly By Night Airlines in the secondary market. Subsequently Fly By Night went bankrupt. What statutory law applies to this transaction? What does Mary have to prove in a lawsuit against Fly By Night's auditors? a) Sarbanes-Oxley Act

b) Securities Act of 1933
c) Dodd-Frank Wall Street Reform and Consumer Protection Act
d) Securities Exchange Act of 1934

Answer 1

Mary Chen would likely reference the Securities Exchange Act of 1934 in the case of Fly By Night Airlines' bankruptcy. To sue the auditors, she must prove negligence or breach of duty under the Sarbanes-Oxley Act of 2002, which safeguards investors from accounting fraud.

Step-by-step explanation:

Mary Chen purchased shares of Fly By Night Airlines in the secondary market. When the company went bankrupt, the statutory law that applies to this transaction is likely the Securities Exchange Act of 1934, which governs the trading of securities, such as stocks, after their initial offering. In a lawsuit against Fly By Night's auditors, Mary would typically have to prove that the auditors were negligent in their duties, which led to her loss.

This could involve demonstrating that the auditors breached their duty of care through actions like failing to disclose fraud or significant financial discrepancies, which is addressed under the Sarbanes-Oxley Act of 2002. This act was specifically designed to prevent accounting fraud and protect investors like Mary by requiring that public corporations provide accurate and reliable financial information.