Series 63 practice questionhardMaterial Misstatements
An issuer knowingly overstates its annual revenue in its prospectus. Under the USA, which of the following consequences is MOST LIKELY?
- AThe issuer may face civil and criminal penalties for fraud✓ Correct answer
- BThe Administrator must allow the issuer to correct the misstatement before taking action
- CNo penalty if investors do not lose money
- DThe issuer may be required to reapply for registration
Explanation
Why A — The issuer may face civil and criminal penalties for fraud
Knowingly making material misstatements is fraud under Section 101, subject to civil and criminal penalties. (B) is incorrect—the Administrator can take immediate action; (C) ignores the act of fraud; (D) is not the standard remedy.
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