Drug Company X Reports the Introduction of a New Pill

question 38

Multiple Choice

Drug Company X reports the introduction of a new pill that is guaranteed to result in 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.Misha is the president of Company X and is pleased with sales of the drug but recognizes that the drug can no longer be advertised as having no side effects.Still,Misha does not believe any misrepresentations were made because Misha was not aware of the hair loss side effect when previous statements were made.Misha decides to do nothing.Is this decision correct as far as Rule 10b-5 is concerned?

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