Question

Dart Corporation engaged Jay Associates, CPAs, to assist in a public stock offering. Jay audited Dart's financial statements and gave an unqualified opinion, despite knowing that the financial statements contained misstatements. Jay's opinion was included in Dart's registration statement. Hansen purchased shares in the offering and suffered a loss when the stock declined in value after the misstatements became known.

If Hansen succeeds in the Section 11 suit against Dart, Hansen will be entitled to:

a) monetary damages comparable to the loss suffered.

b) damages, but only if the shares were resold before the suit was started.

c) damages of three times the original public offering price.

d) rescind the transaction.

Answer 1

Hansen, if successful in the Section 11 suit against Dart, would be entitled to monetary damages equal to the loss suffered due to the misstatements. The answer is option A.

Step-by-step explanation:

If Hansen succeeds in a Section 11 suit against Dart Corporation, Hansen will be entitled to monetary damages comparable to the loss suffered. Section 11 of the Securities Act of 1933 imposes liability on certain participants in the registration statement, including auditors like Jay Associates, if any part of the registration statement, when filed, contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein not misleading.

Hansen does not need to prove that they sold the shares before the suit to claim damages, nor are they entitled to damages at a multiplied rate or the ability to rescind the transaction. The measure of damages in a Section 11 claim generally reflects the difference between the price paid for the security and the value of the security after the misstatements are revealed.