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Answer :
In this scenario, Tessa is considering suing Rob for securities fraud under Rule 10b-5 due to his misrepresentation of the value of the securities she purchased. Rule 10b-5 is a regulation enacted by the Securities and Exchange Commission (SEC) that covers securities fraud, prohibiting deceptive practices in connection with the buying or selling of securities.
To determine whether Tessa can successfully sue Rob under Rule 10b-5, it's important to note the elements necessary for a private party to bring a claim:
Misrepresentation of Material Fact: There must be a false statement or omission of a material fact. Rob's misrepresentation of the securities' value satisfies this element.
Scienter: The defendant must have acted with wrongful intent, meaning they knew the statement was false or were reckless in their disregard for the truth. In this case, Rob knowingly misrepresented the value, indicating scienter.
Reliance: The investor must have relied on the misrepresentation when making the decision to buy or sell. Tessa relied on Rob’s false statements when purchasing the securities.
Economic Loss: Generally, the plaintiff must have suffered an economic loss due to the fraud. This is where Tessa’s case encounters a problem. Tessa did not suffer a loss despite Rob’s misrepresentation.
Causation (proximate cause): The plaintiff needs to show that the misrepresentation or deceptive conduct caused the loss. Without an economic loss, this is also problematic for Tessa.
Given these elements, Tessa's lawsuit under Rule 10b-5 will likely not be successful primarily because she did not suffer an economic loss. According to securities law, including cases interpreted by courts, an economic loss is a requisite for a successful claim of fraud.
Therefore, the correct answer is A) No, because Tessa did not suffer an economic loss.
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