Series 63 practice questionmediumMaterial Information/Omissions
An issuer's prospectus failed to disclose substantial pending litigation. Under the USA, this omission is considered:
- AFraudulent and grounds for civil liability✓ Correct answer
- BPermissible if the case has not resulted in a judgment
- CA minor administrative violation
- DAllowed if the litigation is not yet public
Explanation
Why A — Fraudulent and grounds for civil liability
Omitting material litigation is fraudulent and may lead to civil liability under Section 410 of the USA. Pending cases that are material must be disclosed, regardless of outcome or publicity (B, D); (C) underestimates the seriousness.
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