Posted: March 29th, 2022
Mary is the President of Rocks, Inc. a mining company. She is told by John, an engineer for the company, that he has located a major ore strike. it is on land that Rocks does not own. He suggests that Mary attempts to acquire the land without disclosing to anyone, including Rock’s board, the extent of the strike. Mary comes up with the idea of telling the board that the land simply will be a good real estate investment. the board balks at paying cash, but authorizes Mary to acquire the land in exchange for shares of the company. john as a drinking problem and talks freely about the strike. word begins to spread and Todd the owner of the land for which Mary is negotiating, gets wind of it. he asks if the rumor is true, but Mary denies it. as a result, he accepts shares worth $100,000 which is what he believes to be fair market value of the land. after the strike is subsequently announced, his shares double in price.
1.) Is John liable under Rule 10b-5?
2.) Is Mary liable under Rule 10b-5?
3.) Assuming for purposes of this question, that Mary is liable under Rule 10b-5, which of the following best describes the parties who might successfully sue her:
a. only Todd,
b. The SEC, Dept. of Justice and Todd,
c. Both the SEC and Dept. of Justice,
d. Only the SEC
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