[Ninja20]

Can someone explain why it is not D ? isnt this section applicable only if there is an intent to fraud ?

Answer is C.

The antifraud provisions of Rule 10b-5 of the Securities Exchange Act of 1934:

A.

apply only if the securities involved were registered under either the Securities Act of 1933 or the Securities Exchange Act of 1934.

B.

require that the plaintiff show negligence on the part of the defendant in misstating facts.

C.

require that the wrongful act must be accomplished through the mail, any other use of interstate commerce, or through a national securities exchange.

D.

apply only if the defendant acted with intent to defraud.

[pickanicken]

I think D is incorrect because there are other factors other than just the intent to defraud; such as, misstatement of material fact, reliance, and the connection with the sale of the security, and loss from the transaction. Rule 10b states that its illegal for anyone to use interstate commerce or national securities exchange to defraud anyone. I could see why D looks appealing but I think C is the better answer. I think the word “only” is the issue with D.

REG - 81
BEC - 83
AUD - 86
FAR - 78 (Done!)

[pg2324]

Under the 1934 act, one of the things that must be proven is fraud, but there are two types – Actual Fraud and Constructive Fraud. Actual fraud (also called Scienter) is the intent to commit fraud. Constructive Fraud is basically Gross Negligence to the point that it is considered fraud. So under 1934, the plaintiff does have to show fraud has been committed, but there are two definitions of fraud. It does not necessarily have to be with intent, which is what answer D is saying by using the word “only”.

I honestly wouldn't have guessed answer C because I don't remember that criteria being mentioned in my materials, so I might have tripped up with this questions as well choosing answer D because the other choices did not stand out to me.

[Ssbknyc]

@Ninja20 the 1934 Act is a Federal Law (10b-5 is part of 1934 Act), therefore, to be prosecuted under Federal Law the perpetrator has to commit the act across state lines (Intercommerce) and in addition the National Stock Exchange is regulated under 1934 Act, which is regulated by the Federal Government.

Done 08/2014-08/2015

[Ninja20]

Thank you guy!

[Author]

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