Rand, an accountant, includes a false statement in a report for Social Media Inc. that is filed with the Securities and Exchange Commission. When Teo buys stock in Social Media and loses money on the investment, he files a suit against Rand, alleging fraud under the 1934 Securities Exchange Act. To avoid liability, Rand can show that he
A)intended to defraud Social Media, not Teo.
B)intended to profit on stock trades generally, not only Teo's.
C)is an otherwise competent accountant.
D)had no knowledge that the statement was false.

Question

Quizplus · Accepted Answer

Rand can avoid liability for fraud under the 1934 Securities Exchange Act by demonstrating that he had no knowledge that the statement was false. The Act requires that the defendant acted knowingly or with reckless disregard for the truth for liability to attach.

Rand, an Accountant, Includes a False Statement in a Report