Question

When Looking Glass Corporation wishes to issue certain securities, it must provide sufficient infor­mation for Alice, and other unsophisticated investors, to evaluate the fi­nancial risk involved. Specifically, the law imposes liability for making a false statement or omission that is "material." What sort of information would Alice consider material?

Answer 1

Answer:

#See detailed explanation below.

Explanation:

-Alice, like most investors of average wealth and financial sophistication, are unmoved with minor inaccuracies but rather $material \ facts$ which when disclosed is likely change her decisions to purchase  securities.

-Such facts include: dividend policy, fraud, financial performance, business model, new product inventions, change in production systems,experience and background in the industry  as well as legal obligations to third parties.

-A corporation not acting in good faith and failing to disclose such material facts opens itself to legal ramifications under the securities law.

-Such legal actions, might in some cases lead to a significant class suit that might threaten bankruptcy.