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Articles 1 - 30 of 341
Full-Text Articles in Law
Speech Without Speakers: Eliminating Artificial Barriers To Pleading Corporate Scienter In Securities Fraud Claims, Jennifer Ligansky
Speech Without Speakers: Eliminating Artificial Barriers To Pleading Corporate Scienter In Securities Fraud Claims, Jennifer Ligansky
Fordham Journal of Corporate & Financial Law
To successfully plead securities fraud claims under Rule 10b–5, the Private Securities Litigation Reform Act (“PSLRA”) requires that plaintiff-investors raise a “strong inference” that the defendant acted with scienter when issuing a false statement. But pleading scienter presents a challenging issue when the defendant is not a person, but an entity. When the defendant is a corporation, U.S. Circuit Courts of Appeals have adopted different approaches for determining whether the plaintiff has pleaded a strong inference of scienter. Some circuits hold that plaintiffs can raise a strong inference of corporate scienter only if the complaint identifies a speaker who knew …
Socially Acceptable Securities Fraud, Christine Hurt
Socially Acceptable Securities Fraud, Christine Hurt
Faculty Journal Articles and Book Chapters
What is a lie? Moreover, where is it a lie? Lies are bad. Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 create liability for issuer firms and individuals who make “an untrue statement of a material fact” or omit “a material fact required to be stated therein or necessary to make the statements therein not misleading.” In the ninety years since the passage of the Securities Exchange Act, however, the number of ways in which market participants may publicly disseminate statements that will be consumed by investors has exploded; does 10b-5 really apply to all these …
The Unreasonableness Of Reasonable: Rethinking The Reasonable Investor Standard, Alexandra Li
The Unreasonableness Of Reasonable: Rethinking The Reasonable Investor Standard, Alexandra Li
Northwestern University Law Review
This Note explores the “reasonable investor” standard in light of recent developments in pandemic-era securities litigation. Scholars have long criticized the reasonable investor standard for determining materiality. Given the dramatic backdrop of the COVID-19 pandemic, the limitations of the standard are becoming ever more evident. This Note provides a brief history of the development of the current standard and highlights some of its problems through two recent COVID-19 securities fraud cases. This Note argues that the reasonable investor standard is no longer sufficient to protect investors. Through examining tort law and First Amendment jurisprudence, this Note differentiates between the “reasonable” …
Event-Driven Suits And The Rethinking Of Securities Litigation, Merritt B. Fox, Joshua Mitts
Event-Driven Suits And The Rethinking Of Securities Litigation, Merritt B. Fox, Joshua Mitts
Faculty Scholarship
Event-driven securities suits-ones that arise after an issuer has experienced some kind of disaster-have become increasingly prevalent in recent years. These suits are based on the fraud-on-the-market doctrine, a doctrine that ultimately gives rise to the bulk of the damages paid out in settlements and judgments pursuant to private litigation under the U.S. securities laws. The theory behind fraud-on-the-market cases is that when an issuer's share price has been inflated by a Rule-10b-5-violating misstatement, investors who purchased shares at the inflated price have suffered a compensable injury if they still hold the shares after the inflation is gone. Although these …
The Securities And Exchange Commission As Human Rights Enforcer?, Jena Martin, Rachel Chambers
The Securities And Exchange Commission As Human Rights Enforcer?, Jena Martin, Rachel Chambers
Faculty Articles
On April 28, 2022, the Securities and Exchange Commission (SEC) announced that it had charged Brazilian mining company Vale with misleading investors about safety issues prior to a deadly dam collapse that killed hundreds and led to significant environmental harm in the Brazilian state of Minas Gerais. The action against Vale was largely seen as the agency's first significant move after it had created an Environmental, Social, and Governance (ESG) Task Force within the Division of Enforcement, the purpose of which is to identify and investigate ESG-related violations.
This action against Vale also emerged at a time when scholars, practitioners, …
Top Ten Issues In De-Spac Securities Litigation, Wendy Gerwick Couture
Top Ten Issues In De-Spac Securities Litigation, Wendy Gerwick Couture
University of Arkansas at Little Rock Law Review
I am delighted to contribute to this symposium on special purpose acquisition companies (SPACs). The securities litigation associated with the de-SPAC transaction is at an early stage, but courts are already wrestling with a number of unsettled issues that cast a mirror on SPACs and the securities laws more broadly. As these issues are resolved, they will affect the future of de-SPAC transactions as well as the regulatory environment in which they operate. In this essay, I identify ten such issues, drawing from the pleadings, briefings, and hearings in pending de-SPAC securities cases, with the goal of highlighting the key …
Friends Without Benefits: Criminal Insider Trading Liability And The "Personal Benefit" Test After Blaszczak, Curtis A. French
Friends Without Benefits: Criminal Insider Trading Liability And The "Personal Benefit" Test After Blaszczak, Curtis A. French
JCLC Online
The U.S. Supreme Court established the “personal benefit” test in Dirks v. SEC to determine whether a tippee assumed a fiduciary duty to not trade based on or disclose inside information when a tipper breached his or her fiduciary duty by improperly disclosing such information to the tippee. Under the personal benefit test, a tipper breaches his or her fiduciary duty if the tipper derives a personal benefit, either directly or indirectly, from disclosing the inside information to a tippee. The Supreme Court provided examples as to what constitutes a personal benefit, such as the tipper’s expectation of reputational benefits …
Power And Statistical Significance In Securities Fraud Litigation, Jill E. Fisch, Jonah B. Gelbach
Power And Statistical Significance In Securities Fraud Litigation, Jill E. Fisch, Jonah B. Gelbach
All Faculty Scholarship
Event studies, a half-century-old approach to measuring the effect of events on stock prices, are now ubiquitous in securities fraud litigation. In determining whether the event study demonstrates a price effect, expert witnesses typically base their conclusion on whether the results are statistically significant at the 95% confidence level, a threshold that is drawn from the academic literature. As a positive matter, this represents a disconnect with legal standards of proof. As a normative matter, it may reduce enforcement of fraud claims because litigation event studies typically involve quite low statistical power even for large-scale frauds.
This paper, written for …
The New Insider Trading, Karen E. Woody
The New Insider Trading, Karen E. Woody
Scholarly Articles
Pursuant to the SEC’s Rule 10b-5, in order to obtain a conviction for insider trading based upon a tipper-tippee theory, the government must prove that the tipper received a personal benefit for the tip, and that the tippee knew about that benefit. The last five years of blockbuster insider trading cases have focused on this seemingly nebulous personal benefit test, and the Supreme Court has been unable to clear the muddy waters. As a result, the parameters of insider trading remain hard to pin down and often shift depending on the facts of the most recent case. Two terms ago, …
Kill Cammer: Securities Litigation Without Junk Science, J. B. Heaton
Kill Cammer: Securities Litigation Without Junk Science, J. B. Heaton
William & Mary Business Law Review
Securities litigation is a hotbed of junk science concerning market efficiency. This Article explains why and suggests a way out. In its 1988 decision in Basic v. Levinson, the Supreme Court endorsed the fraud on the market presumption for securities traded in an efficient market. Faced with the task of determining market efficiency, courts throughout the nation embraced the ad hoc speculations of a first-mover district court that proclaimed, in Cammer v. Bloom, how to allege (and presumably prove) facts that would do just that. The Cammer court’s analysis did not rely on financial economics for its notions, but instead …
Morrison And Cryptocurrencies: Is It Time To Revisit The Extraterritorial Application Of Rule 10b-5?, Eleanor B. Eastham
Morrison And Cryptocurrencies: Is It Time To Revisit The Extraterritorial Application Of Rule 10b-5?, Eleanor B. Eastham
Georgia Journal of International & Comparative Law
No abstract provided.
Are Securities Laws Effective Against Climate Change? A Proposal For Targeted Climate Related Disclosure And Ghg Reduction, Nate Chumley
Are Securities Laws Effective Against Climate Change? A Proposal For Targeted Climate Related Disclosure And Ghg Reduction, Nate Chumley
Fordham Journal of Corporate & Financial Law
The New York Attorney General filed a lawsuit against Exxon Mobil on October 24, 2018, claiming the company committed securities fraud in order to prop up the value of the company by publicly disclosing a higher proxy cost—or projected future cost—of climate change regulation than the internal cost used. Following this lawsuit, a federal class action was filed utilizing the same legal theory on the same facts. These lawsuits should be viewed as part of the larger history of lawsuits against large fossil fuel companies for climate change-related harms. Public nuisance theory largely captured a set of lawsuits against these …
The Indian Securities Fraud Class Action: Is Class Arbitration The Answer?, Brian T. Fitzpatrick, Randall S. Thomas
The Indian Securities Fraud Class Action: Is Class Arbitration The Answer?, Brian T. Fitzpatrick, Randall S. Thomas
Vanderbilt Law School Faculty Publications
In 2013, India enacted one of the most robust private enforcement regimes for securities fraud violations in the world. Unlike in most other countries, Indian shareholders can now initiate securities fraud lawsuits on their own, represent all other defrauded shareholders unless those shareholders affirmatively opt out, and collect money damages for the entire class. The only thing missing is a better financing mechanism: unlike the United States, Canada, and Australia, India does not permit contingency fees, so class action lawyers cannot front the costs of litigation in exchange for collecting a percentage of what they recover. On the other hand, …
Watching Insider Trading Law Wobble: Obus, Newman, Salman, Two Martomas, And A Blaszczak, Donald C. Langevoort
Watching Insider Trading Law Wobble: Obus, Newman, Salman, Two Martomas, And A Blaszczak, Donald C. Langevoort
Georgetown Law Faculty Publications and Other Works
“The crime of insider trading,” Judge Jed Rakoff has said, “is a straightforward concept that some courts have managed to complicate.” In the last eight years or so, insider trading law has wobbled visibly (in the Second Circuit in particular) in applying the standard for tipper-tippee liability originally set in the Supreme Court’s Dirks decision in 1983: from Obus (2012) to Newman (2014), with a detour to the Supreme Court in Salman (2016), and then two Martoma opinions (2017 and 2018). Most recently, the court of appeals offered what to many was a major surprise in its Blaszczak …
Leidos And The Roberts Court's Improvident Securities Law Docket, Matthew C. Turk, Karen E. Woody
Leidos And The Roberts Court's Improvident Securities Law Docket, Matthew C. Turk, Karen E. Woody
Karen Woody
For its October 2017 term, the U.S. Supreme Court took up a noteworthy securities law case, Leidos, Inc. v. Indiana Public Retirement System. The legal question presented in Leidos was whether a failure to comply with a regulation issued by the Securities and Exchange Commission (SEC), Item 303 of Regulation S-K (Item 303), can be grounds for a securities fraud claim pursuant to Rule 10b-5 and the related Section 10(b) of the 1934 Securities Exchange Act. Leidos teed up a significant set of issues because Item 303 concerns one of the more controversial corporate disclosures mandated by the SEC—an …
Sec V. Creditors: Why Sec Civil Enforcement Practice Demonstrates The Need For A Reprioritization Of Securities Fraud Claims In Bankruptcy, Sean Kelly
St. John's Law Review
(Excerpt)
This Note examines how this tension has motivated the SEC to use receiverships as a preferred vehicle to maximize recovery for defrauded security holders and, in the process, create what amounts to an SEC-run bankruptcy proceeding. The use of these receiverships has triggered a high-stakes race to the courthouse among the SEC and creditors, where mere hours can be the difference between millions in recovery and nothing at all. To end this costly race, this Note proposes a solution that seeks to harmonize securities fraud enforcement with bankruptcy law, which starts with revisiting Bankruptcy Code § 510(b) to reprioritize …
Federalism And Investor Protection: Constitutional Restraints On Preemption Of State Remedies For Securities Fraud, Manning Gilbert Warren Iii
Federalism And Investor Protection: Constitutional Restraints On Preemption Of State Remedies For Securities Fraud, Manning Gilbert Warren Iii
Manning G. Warren III
Warren discusses the Private Securities Litigation Reform Act and the National Securities Market Improvement Act, among other issues. Predominant federalism postulates foreclose the proposed intrusion into investors' tort remedies traditionally allowed by the states under common law.
Insider Trading Framework In United States And Egyptian Stock Markets, Elsayed Eldaydamony
Insider Trading Framework In United States And Egyptian Stock Markets, Elsayed Eldaydamony
Maurer Theses and Dissertations
This thesis examines the law of insider trading in both the American and Egyptian legal systems. It seeks to pinpoint the policy rationale behind prohibiting insider trading, the theories of civil enforcement and criminalization, and the concept of tipping in the United States. It also analyzes the express statutory prohibition under Egyptian law. Furthermore, it explains the doctrinal link between securities fraud and insider trading in the U.S. as well as the enforcement mechanisms in place at the SEC, the NYSE, and the NASDAQ. It also surveys the surveillance authority of the Egyptian Financial Regularity Authority and of the Egyptian …
Prosecuting Securities Fraud Under Section 17(A)(2), Wendy Gerwick Couture
Prosecuting Securities Fraud Under Section 17(A)(2), Wendy Gerwick Couture
Articles
No abstract provided.
Global Settlements: Promise And Peril, John C. Coffee Jr.
Global Settlements: Promise And Peril, John C. Coffee Jr.
Faculty Scholarship
In 2010, Morrison v. National Australia Bank Ltd. destabilized the world of securities litigation by denying those who purchased their securities outside the U.S. the ability to sue in the U.S. (as they had previously often done). Nature, however abhors a vacuum, and practitioners and other jurisdictions began to seek ways to regain access to U.S. courts. Several techniques have emerged: (1) expanding settlement classes so that they are broader than litigation classes and treating the location of the transaction as strictly a merits issue that defendants could waive; (2) adopting U.S. law as applicable to securities issued abroad by …
Regulating High-Frequency Trading: The Case For Individual Criminal Liability, Orlando Cosme Jr.
Regulating High-Frequency Trading: The Case For Individual Criminal Liability, Orlando Cosme Jr.
Journal of Criminal Law and Criminology
The popular imagination of securities trading is a chaotic, physical stock exchange—a busy floor with hurried traders yelling, “buy, buy, buy!” While this image is a Hollywood and media favorite, it is no longer accurate. In 2019, most securities trading is conducted electronically on digital markets. One type of trading strategy, high-frequency trading, utilizes algorithms, data centers, fiber optic cables, and supercomputers to obtain an edge in the market. High-frequency trading has leveraged advancements in technology to constitute over half of all trading volume in a given day. High-frequency trading, however, has come under scrutiny in recent years as it …
A Legal Frankenstein’S Monster: The Complete Bar Order In Securities Fraud Class Action Lawsuits, Jonathan C. Stanley
A Legal Frankenstein’S Monster: The Complete Bar Order In Securities Fraud Class Action Lawsuits, Jonathan C. Stanley
Washington and Lee Law Review
No abstract provided.
Insider Trading Law And The Ambiguous Quest For Edge, A. C. Pritchard
Insider Trading Law And The Ambiguous Quest For Edge, A. C. Pritchard
Michigan Law Review
A review of Sheelah Kolhatkar, Black Edge.
The Logic And Limits Of Event Studies In Securities Fraud Litigation, Jill E. Fisch, Jonah B. Gelbach, Jonathan Klick
The Logic And Limits Of Event Studies In Securities Fraud Litigation, Jill E. Fisch, Jonah B. Gelbach, Jonathan Klick
All Faculty Scholarship
Event studies have become increasingly important in securities fraud litigation after the Supreme Court’s decision in Halliburton II. Litigants have used event study methodology, which empirically analyzes the relationship between the disclosure of corporate information and the issuer’s stock price, to provide evidence in the evaluation of key elements of federal securities fraud, including materiality, reliance, causation, and damages. As the use of event studies grows and they increasingly serve a gatekeeping function in determining whether litigation will proceed beyond a preliminary stage, it will be critical for courts to use them correctly.
This Article explores an array of …
Thinking Fast And Slow About The Concept Of Materiality, Mark J. Loewenstein
Thinking Fast And Slow About The Concept Of Materiality, Mark J. Loewenstein
Publications
Determining whether, for securities law purposes, a misrepresentation or omission is material raises interesting questions. The Court of Appeals in SEC v. Texas Gulf Sulphur Co. provided some guidance on materiality, and the U.S. Supreme Court has weighed in several times in the past 50 years. This article first discusses what Texas Gulf Sulphur contributed to the doctrine of materiality, then briefly considers other dimensions of the doctrine, and finally moves to its thesis: The doctrine of materiality should take into account important psychological insights and heuristics that may affect the way that a fact finder decides whether a misrepresentation …
Morality And Securities Fraud, Jayme Herschkopf
Morality And Securities Fraud, Jayme Herschkopf
Marquette Law Review
Securities fraud features prominently in conversations about financial reform, and for good reason. In addition to the disproportionate number of securities fraud lawsuits and government actions filed every year, securities fraud case law is frequently consulted as an analytical aid for other types of corporate fraud. And yet, in discussing the interpretation and application of the securities laws, scholars, judges, and lawmakers alike have largely overlooked a feature of securities fraud that could offer significant assistance in many challenging areas: namely, that securities fraud, including civil securities fraud, has a pronounced moral dimension.
This Article explores the role that moral …
Private Enforcement Of Company Law And Securities Regulation In Korea, Hwa-Jin Kim
Private Enforcement Of Company Law And Securities Regulation In Korea, Hwa-Jin Kim
Book Chapters
This chapter offers a brief overview of the private enforcement of corporate law and securities regulation in Korea, with particular reference to the current legislative efforts in the Korean National Assembly and recent court cases. This chapter also talks about Korea’s ill-fated and misguided adoption of the fraud-on-the-market theory in securities fraud litigation.
Leidos And The Roberts Court's Improvident Securities Law Docket, Matthew C. Turk, Karen E. Woody
Leidos And The Roberts Court's Improvident Securities Law Docket, Matthew C. Turk, Karen E. Woody
Scholarly Articles
For its October 2017 term, the U.S. Supreme Court took up a noteworthy securities law case, Leidos, Inc. v. Indiana Public Retirement System. The legal question presented in Leidos was whether a failure to comply with a regulation issued by the Securities and Exchange Commission (SEC), Item 303 of Regulation S-K (Item 303), can be grounds for a securities fraud claim pursuant to Rule 10b-5 and the related Section 10(b) of the 1934 Securities Exchange Act. Leidos teed up a significant set of issues because Item 303 concerns one of the more controversial corporate disclosures mandated by the SEC—an …
The Reasonable Investor Of Federal Securities Law, Amanda Rose
The Reasonable Investor Of Federal Securities Law, Amanda Rose
Vanderbilt Law School Faculty Publications
Federal securities law defines the materiality of corporate disclosures by reference to the views of a hypothetical reasonable investor. For decades the reasonable investor standard has been a flashpoint for debate with critics complaining of the uncertainty it generates and defenders warning of the under-inclusiveness of bright-line alternatives. This Article attempts to shed fresh light on the issue by considering how the reasonable investor differs from its common law antecedent, the reasonable person of tort law. The differences identified suggest that the reasonable investor standard is more costly than tort laws reasonable person standard - the uncertainty it generates is …
Brief Of Professors At Law And Business Schools As Amicus Curiae In Support Of Respondents, James D. Cox, J. Robert Brown Jr., Lyman Johnson, Lawrence W. Treece, Joan Macleod Heminway
Brief Of Professors At Law And Business Schools As Amicus Curiae In Support Of Respondents, James D. Cox, J. Robert Brown Jr., Lyman Johnson, Lawrence W. Treece, Joan Macleod Heminway
Faculty Scholarship
This Amicus Brief was filed with the U.S. Supreme Court on behalf of nearly 50 law and business faculty in the United States and Canada who have a common interest in ensuring a proper interpretation of the statutory securities regulation framework put in place by the U.S. Congress. Specifically, all amici agree that Item 303 of the Securities and Exchange Commission's Regulation S-K creates a duty to disclose for purposes of Rule 10b-5(b) under the Securities Exchange Act of 1934.
The Court’s affirmation of a duty to disclose would have little effect on existing practice. Under the current state of …