Question

Under the Section 10(b) Rule 10b-5 antifraud provisions of the Securities Exchange Act of 1934, which of the following conditions must a plaintiff prove to recover damages from an accountant?

A) The plaintiff had no knowledge of the misstatement.
B) The misstatement was unintentional.
C) The misstatement did not involve material facts.
D) The plaintiff relied on the accountant's intentional misstatement of material facts.

Answer 1

To recover damages under Rule 10b-5, a plaintiff must demonstrate reliance on an accountant's intentional or reckless misrepresentation of material facts.

Step-by-step explanation:

Under the Section 10(b) Rule 10b-5 of the Securities Exchange Act of 1934, to recover damages from an accountant due to fraud, a plaintiff must prove several key elements. One of these is that the plaintiff relied on the accountant's intentional misstatement of material facts. This means that a prerequisite for a plaintiff to recover damages is to show that they acted upon misrepresented information that was significant, or 'material', which the accountant either knowingly or recklessly provided as truthful. It does not matter whether the plaintiff had knowledge of the misstatement or whether the misstatement was unintentional; the critical factor is the reliance on an intentional or reckless falsehood that involved material facts.