The president of a company says that new products to be introduced are sure to double company profits. Based on this, investors buy stock in the company, pushing up its price. The products flop, the company loses money, so the stock price falls. Investors are most likely to sue the president of the company under what theory provided by the securities law?

Question

Quizplus · Accepted Answer

The investors are most likely to sue the president of the company under liability for misstatements provided by the securities law. This theory holds a person or entity liable for making false or misleading statements in connection with securities offerings or trading. The president's statement that the new products would double the company's profit was a material misstatement that influenced investors to buy stock, causing them financial loss when the products failed to deliver the expected results.

The President of a Company Says That New Products to Be