Question

When a corporation wishes to issue certain securities, it must provide sufficient information for an unsophisticated investor to evaluate the financial risk involved. Specifically, the law imposes liability for making a false statement or omission that is "material." What sort of information would an investor consider material?

Answer 1

Generally unsophisticated investors are concerned with facts that would make them reject buying the stocks or securities specially regarding certain conditions of the corporation, e.g.:

• changes in dividends policies
• changes int he corporation's financial condition
• corporation's liabilities and pending lawsuits
• loans to managers or directors
• high amount of customer delinquency
• new developments or products
• other important and relevant information