Drug Company X Reports the Introduction of a New Pill

question 39

Multiple Choice

Drug Company X reports the introduction of a new pill that is guaranteed to cause weight loss with no side effects.The information was advertised in connection with a public offering of stock of the company's stock.Later,it becomes apparent through additional testing that unfortunately the new pill also results in premature hair loss,a material issue.Monika is the president of Company X and is very pleased with sales of the drug.She recognizes that she can no longer advertise the drug as having no side effects,but she does not believe she has made any misrepresentations because she was not aware of the hair loss side effect when previous statements were made.She decides to do nothing.Has she made the correct decision as far as Rule 10b-5 is concerned?

• A) Yes, because she has no duty to disclose later test results.
• B) Yes, because she has no duty to disclose later test results that involve only cosmetic issues.
• C) Yes, because she has no duty to disclose later test results that involve issues that are not life threatening.
• D) No, she made the wrong decision because she has an obligation to disclose the results.

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Definitions:

Abnormal Behavior

Actions, feelings, or thoughts that are atypical, significantly deviate from societal norms, and may impair functioning.

Major Depression

A mental condition characterized by an enduring depressed state or a loss of interest in once pleasurable activities, leading to significant disruption in daily living.

Symptoms

Observable signs or indications of a disease or disorder experienced by an individual.

Abnormal Behavior

Patterns of emotion, thought, or action deemed pathological for cultural, societal, or situational contexts, often causing distress or dysfunction.