Question

Bran, CPA, audited Frank Corporation. The shareholders sued both Frank and Bran for securities fraud under the Federal Securities Exchange Act of 1934. The court determined that there was securities fraud and that Frank was 80% at fault and Bran was 20% at fault due to her negligence in the audit. Both Frank and Bran are solvent and the damages were determined to be $1 million. What is the maximum liability of Bran?

Answer 1

Bran's maximum liability for the securities fraud is 20% of the total damages due to her negligence. Thus, with $1 million in damages, Bran's share of liability would be $200,000, unless joint and several liability applies.

Step-by-step explanation:

The maximum liability of Bran, who was found to be 20% at fault for the securities fraud involving Frank Corporation, would be 20% of the total damages. Since the total damages were determined to be $1 million, Bran's maximum potential liability would be $200,000.

However, under the securities law, especially the Federal Securities Exchange Act of 1934, there are provisions for joint and several liability. This could potentially impact the allocation of fault and payment. If joint and several liability applies, Bran could be held responsible for the full amount if Frank Corporation is unable to pay.

Still, based on the information given, without considering joint and several liability, Bran's liability is proportional to her fault percentage.