A shareholder who was buying additional shares in Wayport,Inc.,told the shareholder seller "he was not aware of any bluebirds of happiness in the corporation's world." However,at the time the buyer made the statement he was aware that the CEO had informed the board via e-mail of a patent sale by Wayport that meant that the corporation would receive net proceeds of $7.6 million and would increase its year-end cash position by 22%.Which of the following statements is correct?

Question

Quizplus · Accepted Answer

The buyer's statement is misleading because he is aware of material information about the corporation that he is not disclosing to the seller. This could constitute securities fraud under Rule 10b-5, which prohibits the making of any untrue statement of a material fact or omission of a material fact that makes a statement misleading. The seller could have a claim against the buyer for securities fraud.

A Shareholder Who Was Buying Additional Shares in Wayport,Inc