Question

A person will be liable for a violation of Section 10b-5 if his/her conduct was:

a. intentional

b. negligent

c. reckless

d. none of the above

Answer 1

A person will be liable for a violation of Section 10b-5 if his/her conduct was Intentional.

For your reference:

The language of rule 10b-5 is extremely broad. The rule makes it unlawful for "any person directly or indirectly" to engage in certain prohibited activities "in connection with the purchase or sale of any security." As the interpretation of the rule has developed, the number and variety of prohibited activities have increased. The prescribed activities include misrepresentations and half-truths, which are forbidden by subsection two of the rule. More important, however, subsections one and three prohibit employment of "any device, scheme or artifice to defraud' or use of "any act, practice or course of business which operates or would operate as a fraud or deceit. 'This language has been interpreted to prohibit nondisclosure in circumstances in which a duty to disclose is said to exist. It has also been interpreted to prohibit nonverbal acts, such as the failure to declare a dividend or mismanagement of a corporation, where the purpose is to drive down the price of shares so that insiders can benefit by purchasing at low prices."