Matty is an employee of ValCom but doe not own any ValCom stock. At her five year employment anniversary, she decides to buy 50 shares of a new issue of company stock as a savings plan and afterward receives the signed registration statement. Because of her employment at ValCom, she recognizes that the statement contains an untrue material fact. Can she sue the auditor?

Question

Matty is an employee of ValCom but doe not own any ValCom stock. At her five year employment anniversary, she decides to buy 50 shares of a new issue of company stock as a savings plan and afterward receives the signed registration statement.  Because of her employment at ValCom, she recognizes that the statement contains an untrue material fact. Can she sue the auditor?

Quizplus · Accepted Answer

BUnder Section 11 of the Securities Act of 1933, a buyer of securities can sue the issuer's auditor for misstatements or omissions of material facts in the registration statement, without needing to prove reliance on those statements. This means that if Matty recognizes an untrue material fact in the registration statement, she can sue the auditor under Section 11, regardless of whether she relied on the statement (A). Additionally, if she can prove that she would not have bought the stock otherwise, this further supports her case (B).

Matty Is an Employee of ValCom but Doe Not Own