Which of the following is true of Rule 10b-5?
A) Privity of contract is a necessity for bringing a lawsuit under this rule.
B) Civil private lawsuits are not permitted under this rule.
C) Only purchasers and sellers of securities can sue under this rule.
D) Ordinary negligence is a violation of this rule.

Question

Quizplus · Accepted Answer

Rule 10b-5, promulgated under the Securities Exchange Act of 1934, is designed to protect investors by preventing fraud in the securities market. It specifically allows purchasers and sellers of securities to sue for damages if they have been defrauded in connection with the purchase or sale of securities. The rule does not require privity of contract between the parties for a lawsuit to be brought, nor does it prohibit civil private lawsuits; in fact, it is a primary mechanism for such actions. Additionally, the standard for violation of Rule 10b-5 goes beyond ordinary negligence, requiring scienter, which means a wrongful state of mind, such as intent to deceive, manipulate, or defraud.

Which of the Following Is True of Rule 10b-5