Cathy is an accountant with Discount Retail Corporation. Efrem buys Discount Retail stock and loses money on the investment. To recover from Cathy under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, Efrem must prove

Question

Cathy is an accountant with Discount Retail Corporation. Efrem buys Discount Retail stock and loses money on the investment. To recover from Cathy under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, Efrem must prove​

Quizplus · Accepted Answer

To recover under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, Efrem must prove fraud, reliance, materiality, causation, and scienter. "Fraud" means a misrepresentation or omission of material fact. "Reliance" means that the plaintiff reasonably relied on the misrepresentation or omission. "Materiality" means that the misrepresentation or omission is significant enough to affect a reasonable investor's decision-making process. "Causation" means that the misrepresentation or omission caused the plaintiff's loss. "Scienter" means that the defendant acted with intent to deceive, manipulate, or defraud. In this case, Efrem must prove that Cathy, as an accountant with Discount Retail, made a misrepresentation or omission of material fact with intent to deceive, and that he reasonably relied on the misrepresentation or omission, which caused his loss.

Cathy Is an Accountant with Discount Retail Corporation