Law Commons^™

Why Civil Liability For Disclosure Violations When Issuers Do Not Trade?, Merritt B. Fox

Faculty Scholarship

Civil damages liability for securities law periodic disclosure violations has come under attack, particularly fraud-on-the-market class-action lawsuits for investor losses incurred in connection with trading in the secondary market when the issuer has not sold shares. The main line of attack has been the weakness of the compensatory rationale for such suits. Without a compensatory justification, the attackers suggest, the availability of this cause of action is hard to defend given the very substantial use of social resources involved in the litigation that it generates. The critics are right concerning the weakness of the compensatory justification for civil liability. They …