Doug, an accountant, prepares for Econo Enterprise, Inc., a financial statement that omits a material fact. The statement is included in Econo's registration statement with the Securities and Exchange Commission. Felicia, who relies the statement, and Graham, who does not, each buy Econo stock. Under Section 11 of the Securities Act of 1933, Doug may be liable to
A) no one.
B) Felicia only.
C) Felicia and Graham.
D) Graham only.

Question

Doug, an accountant, prepares for Econo Enterprise, Inc., a financial statement that omits a material fact. The statement is included in Econo's registration statement with the Securities and Exchange Commission. Felicia, who relies the statement, and Graham, who does not, each buy Econo stock. Under Section 11 of the Securities Act of 1933, Doug may be liable to​
A) ​no one.
B) ​Felicia only.
C) ​Felicia and Graham.
D) ​Graham only.

Quizplus · Accepted Answer

Section 11 of the Securities Act of 1933 imposes liability on any person who prepares or certifies a registration statement that includes an untrue statement of a material fact or omits a material fact. In this case, Doug, the accountant, prepared a financial statement that omitted a material fact, which was included in Econo's registration statement. Felicia and Graham, who bought Econo stock, relied on this statement. Therefore, both Felicia and Graham may hold Doug liable under Section 11.

Doug, an Accountant, Prepares for Econo Enterprise, Inc