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Question
Mel is a securities broker who holds shares in Beanbag Inc. Mel does not disclose this to his customer Kim, whom he advises to buy Beanbag shares. Mel hopes that by not disclosing his conflict of interest, he will influence Kim to buy the shares. Kim, believing the information on Beanbag shares is given from Mel's disinterested point of view, declares that buying Beanbag shares "sounds like an excellent idea" and purchases the shares. Which of the following statements is most accurate?
A. Kim cannot hold Mel liable because Mel did not make a misstatement of material fact.
B. Kim will have to prove that Mel acted negligently in order to prove a Rule 10b-5 violation.
C. Kim will most likely be able to make a successful claim against Mel under Rule 10b-5.
D. Mel did not have a duty to disclose his conflict of interest to Kim.
Answer
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