Which of the following statements 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 accountants under this rule.
D) Ordinary negligence imposes liability on the accountant under this rule.

Question

Quizplus · Accepted Answer

Rule 10b-5, promulgated under the Securities Exchange Act of 1934, is primarily concerned with fraud in connection with the purchase or sale of securities. It allows for civil lawsuits by purchasers or sellers of securities against those who have defrauded them, including accountants, if they have made false statements or omissions of material facts. The rule does not require privity of contract for a lawsuit, does permit civil private lawsuits, and requires scienter (a higher standard than ordinary negligence) for liability.

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