Carl is an accountant who helped Sireus,Inc.to evaluate and sell its securities.Mark,who purchased the securities,finds that they have been overvalued.Which of the following statements is true of this scenario?
A) Carl has violated Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 if he is guilty of ordinary negligence.
B) Mark can bring a civil private cause of action and seek monetary damages under Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934.
C) Mark cannot sue Carl as he is not in a privity of contract relationship with him.
D) Mark cannot sue Carl as Mark is only an incidental beneficiary of Carl's work.

Question

Quizplus · Accepted Answer

Under Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934, it is illegal to make material misstatements or omissions in connection with the purchase or sale of securities. If Carl overvalued the securities and Mark relied on his advice to purchase them, Mark can bring a civil private cause of action and seek monetary damages. This is because Mark is an investor who was directly impacted by Carl's actions and therefore has standing to sue. Privity of contract is not necessary for a plaintiff to bring a lawsuit under Section 10(b) and Rule 10b-5.

Carl Is an Accountant Who Helped Sireus,Inc