Question

Which of the following is not an example of material information under Section 10(b) and Rule 10b-5?

A) A change in the status of litigation against the company.

B) A change in dividends.

C) A new product, process, or discovery.

D) Any change in the financial status of the company.

E) A contract for the sale of corporate assets or for the purchase of assets.

Answer 1

Based on the definitions under Section 10(b) and Rule 10b-5 of the Securities Exchange Act, a change in dividends (option B) is not considered material information that requires disclosure.

The other options all represent examples of material information that could significantly affect a reasonable investor's decision to buy, sell or hold securities if made public. Companies are required to disclose these types of material information under SEC rules.

Specifically, material information includes:

- Litigation status changes (option A)

- New products, processes or discoveries (option C)

- Financial status changes (option D)

- Major contracts like asset sales/purchases (option E)

However, changes to dividends (option B) are considered ordinary course of business. While important to shareholders, dividend changes alone do not rise to the level of materiality requiring prompt SEC disclosure.

So in summary, a change in dividends is the answer that does NOT represent material information under Section 10(b) and Rule 10b-5. The other options all describe examples of material information that companies must disclose.