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NEW QUESTION: 1
Mr. Big of HiGrow Corporation needs more money to support the exceptional growth rate that his firm is
enjoying. He meets with BigFee Investment Banker, who agrees to handle the IPO for HiGrow. As part of
the process, BigFee's staff works with HiGrow's accountants to prepare the registration statement that is
filed with the SEC. After the issue has been sold to the public, Mr. Sharp, a CPA who has invested in the
stock of HiGrow, discovers that there are some accounting irregularities in the financial statements
provided in HiGrow's prospectus. Who can be sued for the misleading statements?
I. Mr. Big
II. Big Fee Investment Banker
III. HiGrow's accountants
IV. HiGrow's attorneys
A. I, III, and IV only
B. I, II, III, and IV
C. I and II only
D. II and III only
All of the entities can be sued for misleading statements found in HiGrow's financial
statements. The Securities Act of 1933 holds any individual who participates in bringing the new issue to
the public civilly liable for misrepresentations found in the prospectus.
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