Question

When a plaintiff is suing the auditor for damages under Rule 10(b)-5 of the 1934 Securities Act, which of the following is not part of the plaintiff's burden of proof?

a. The financial statements contained a material, factual misrepresentation or omission.
b. The auditor was negligent.
c. The plaintiff relied on the financial statements.
d. Damages were suffered as a result of reliance on the financial statements.

Answer 1

When suing an auditor for damages under Rule 10(b)-5 of the 1934 Securities Act, the plaintiff's burden of proof includes showing material misrepresentation or omission, auditor negligence, reliance on financial statements, and suffered damages.

Step-by-step explanation:

When a plaintiff is suing the auditor for damages under Rule 10(b)-5 of the 1934 Securities Act, the burden of proof includes several factors that the plaintiff needs to establish:

• The financial statements contained a material, factual misrepresentation or omission. The plaintiff needs to show that the auditor provided false or misleading information in the financial statements.
• The auditor was negligent. The plaintiff needs to demonstrate that the auditor did not exercise reasonable care or skill when performing their duties.
• The plaintiff relied on the financial statements. The plaintiff must prove that they relied on the information in the financial statements in making their investment decisions.
• Damages were suffered as a result of reliance on the financial statements. The plaintiff needs to show that they suffered financial losses due to their reliance on the inaccurate or misleading financial statements.