Law Commons^™

What Will It Take To Label Participation In A Deceptive Scheme To Defraud Buyers Of Securities A Violation Of Section 10(B)? The Disastrous Result And Reasoning Of Stoneridge, Mark S. Klock

Mark S Klock

In 2008 the Supreme Court ruled in a 5 to 3 decision that participants to a sham transaction in the product market designed to fraudulently inflate revenue could not be liable in a private action to recover under Section 10(b) of the Securities and Exchange Act because the participants had not communicated directly with the shareholders and therefore the public could not have relied on the misrepresentations. Early commentary has been critical of the majority’s legal reasoning. I bring additional economic theory to the criticism of the majority in light of the subsequent financial sector and macroeconomic collapse and the …