Federal Causes of Action

Question 1

Rule 10(b)(5) Requirements (7)

Answer 1

1. P purchased or sold the security
2. Use of interstate commerce
3. D’s fraudulent/deceptive conduct (an untrue statement of material fact, failure to prevent misleading statements, or insider trading)
4. Materiality- A reasonable investor would find the fact important in deciding whether to purchase or sell a security
5. Scienter- The d must make the statement intentionally or recklessly
6. P’s justifiable reliance on the D’s fraudulent conduct
   7 . Harm to the P

Question 2

Rule 16(b) action elections

Answer 2

1. Applies to Publicly traded corporations (must have securities traded on a national securities exchange OR have assets of more than 10 million and more than 500 shareholders)
2. Applies to Corporate insiders- Directors, Officers, or shareholders with more than 10% of stock
3. Short swing profits- A corporate insider both bought AND sold corporations stock during any 6 month period

Question 3

State causes of action

Answer 3

The tort of fraud

Question 4

What is a tender offer ?

Answer 4

An offer to shareholders of a publicly traded corporation to purchase their stock for a fixed price, typically used to effect a hostile takeover.

A person who acquires more than 5% of stock must file statement with the SEC