Managers Should Under No Conditions Take Actions That Increase Their

question 47

True/False

Managers should under no conditions take actions that increase their firm's risk relative to the market, regardless of how much those actions would increase the firm's expected rate of return.

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Definitions:

Rule 505

Rule 505 was a regulation under Regulation D of the SEC that allowed companies to offer and sell securities to accredited investors without public registration, subject to certain conditions. It has been superseded by updates to the regulations.

Rule 10b-5

A regulation under the U.S. Securities Exchange Act of 1934 aimed at preventing fraud, misrepresentation, and insider trading in the securities market.

With Scienter

Acting with knowledge, especially with regard to the wrongful nature of one's actions.

Burden of Proof

The obligation to present evidence to support one's claim or defense in a legal dispute, determining which party must prove the truth of their assertions to achieve a favorable outcome.