SIE practice questionmediumSecurities Act of 1933 / Prospectus Fraud
A company issues a prospectus for an IPO but intentionally omits a significant pending lawsuit. If investors buy shares based on this incomplete prospectus, what violation has occurred?
- AMarket manipulation
- BFraud under the Securities Act of 1933✓ Correct answer
- CUnregistered selling group activity
- DChurning
Explanation
Why B — Fraud under the Securities Act of 1933
Omitting material facts in a prospectus is fraud under the Securities Act of 1933, which requires full and fair disclosure. Market manipulation concerns trading activity, unregistered selling group is unrelated, and churning is excessive account trading.
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