Professional and Legal Responsibilities

Question 1

Subject: Professional and Legal Responsibilities

What are the plaintiff proof requirements for Section 11 of the 1933 Act?

Answer 1

Subject: Professional and Legal Responsibilities

1. Plaintiff (purchaser) must prove damages were incurred.
2. Plaintiff (purchaser) must prove material misstatement in FS

Question 2

Subject: Professional and Legal Responsibilities

What are the CPA proof requirements for Section 11 of the 1933 Act?

Answer 2

Subject: Professional and Legal Responsibilities
1. Due diligence
2. Plaintiff knew FS were incorrect
3. Loss due to other factors
4. CPA followed GAAP
Note that Plaintiff need not prove reliance/ negligence/ or fraud.

Question 3

Subject: Professional and Legal Responsibilities

What are the plaintiff proof requirements for Section 10 (b) and Rule 10b-5 of the Securities Exchange Act of 1934?

Answer 3

Subject: Professional and Legal Responsibilities
Plaintiff must prove (all of the following)
1. Plaintiff suffered damages
2. Material misstatement or omission released by the firm
3. Plaintiff relied on financial information
4. Existence of Scienter

Question 4

Subject: Professional and Legal Responsibilities

What are the defenses a CPA can use for Section 10 (b) and Rule 10b-5 of the Securities Exchange Act of 1934?

Answer 4

Subject: Professional and Legal Responsibilities

Good Faith rule

Question 5

Subject: Professional and Legal Responsibilities

What are the elements of constructive fraud?

Answer 5

Subject: Professional and Legal Responsibilities

1. Misrepresentation of a material fact
2. Reckless disregard for the truth
3. Reasonable reliance by injured party
4. Injury

Question 6

Subject: Professional and Legal Responsibilities

What are the plaintiff proof requirements for damages under Common Law?

Answer 6

Subject: Professional and Legal Responsibilities

1. Damages were incurred
2. Material Misstatement or omission of a material fact in FS
3. Justifiable reliance on the FS which led to damages

Question 7

Subject: Professional and Legal Responsibilities

What are the elements needed to prove negligence?

Answer 7

Subject: Professional and Legal Responsibilities

1. Breach of Duty of Care
2. Injury
3. Proximate Cause