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Question
Alan, a certified public accountant, prepares and certifies Commercial Products Corporation's financial statements. These statements are included in Commercial's registration statement filed with the Securities and Exchange Commission before Commercial's offering of securities. Donna buys a security covered by the registration statement. Based on this transaction, Donna files a suit against Alan under Section 11 and Section 10(b) of the Securities Exchange Act of 1934. To succeed in the suit, what must Donna prove? Alan responds that Donna was not in privity with him and that even if she had been in privity, she cannot prove his lack of due diligence. Can Alan prevail on these grounds? Why or why not?Answer
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