Reference no: EM131660857

Question: Violations of the 1934 Act. 2TheMart.com, Inc., was conceived in January 1999 to launch an auction Web site to compete with eBay, Inc. On January 19, 2TheMart announced that its Web site was in its "final development" stages and was expected to be active by the end of July as a "preeminent" auction site. The company also said that it had "retained the services of leading Web site design and architecture consultants to design and construct" the site. Based on the announcement, investors rushed to buy 2TheMart's stock, causing a rapid increase in the price. On February 3, 2TheMart entered into an agreement with IBM to take preliminary steps to plan the site. Three weeks later, 2TheMart announced that the site was "currently in final development." On June 1, 2TheMart signed a contract with IBM to design, build, and test the site, with a target delivery date of October 8. When 2TheMart's site did not debut as announced, Mary Harrington and others who had bought the stock filed a suit in a federal district court against the firm's officers, alleging violations of the Securities Exchange Act of 1934. The defendants responded, in part, that any alleged misrepresentations were not material and asked the court to dismiss the suit. How should the court rule, and why?