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:

Obesity Epidemic

A health crisis characterized by widespread and increasing rates of excessive body weight and obesity in a population.

Demographic Features

Characteristics of a population or demographic group, including factors like age, gender, income, education, and ethnicity.

Functionalist

A sociological theory that views society as a complicated system in which its components collaborate to foster unity and maintain equilibrium.

Conflict Views

A term that indicates perspectives focusing on the inherent divisions and competition within societies, often associated with Marxist theory and its emphasis on class struggle.