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Problem 41-2 In the Reeves v. E & Y case the court defined the word notes as it is used in relation to securities. The court adopted the "family resemblance" test. This test compares the note in question with a family of typical transactions that fall outside the securities acts. This "family" includes consumer financing notes, home mortgages and short term securities which are expected to be an investment of one year or less. These notes sold by Co-op may be a short term security, since they were high interest and POD securities Problem 41-7 Hoodes would win from these facts. His conduct was not violated by any law and his trade did not involve insider trading or otherwise limited. Unless there is evidence of insider trading here or otherwise violation of internal rules, or acting in interest contrary to company while holding fiduciary position. Problem 51 -5 The Lindner Funds case extended and explained an earlier case, Aluma Kraft v. Elmer Fox and held that the law extends liability to third parties for whose benefit and guidance the accountant supplies the information, or to such third persons, although not identified, who the accountant knows the recipient of the audit intends to supply such information. Under the facts as given here, if Coopes knew or should have known that the audits would be used by investors then they could be held liable if the audits weren't done properly. The Ultramares Doctrine would require privity between the investment company and the accountants and, under that doctrine, Coopes would not be liable. They would be sued under the foresee ability standard for Lindner's decision to purchase the stock. If the malpractice occurred when Lindner was a shareholder, they would be liable under the restatement standard of being members of a limited class of intended users and they would be liable under the Ultramares doctrine because

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