What Are The Requirements For A Securities Fraud Claim?

Pleading a Claim Under the Securities Exchange Act of 1934

As a shareholder of a company trading on America’s stock exchanges, you have the right to expect corporate integrity.

That expectation of good faith and fair dealing extends to many things, of course, but for many shareholders it coalesces narrowly into this: a reasoned hope that their assets are fully protected against fraudulent company acts or omissions.

That doesn’t always turn out to be the case. In fact, securities fraud in publicly held enterprises is a recurrent problem of vast magnitude. And it is an issue explicitly recognized by the Securities Exchange Commission nearly 90 years ago.

Section 10(b): Key investor securities fraud protection

Section 10(b) of the seminal 1934 Securities Exchange Act is the country’s core anti-fraud provision. An in-depth American Bar Association article spotlighting the requirements imposed on shareholders seeking to make a securities fraud claim duly notes that the clause “continues to evolve” through high numbers of actions and scores of court opinions.

The essentials of Section 10(b): What are the pleading duties?

An aggrieved investor or group of shareholders must satisfy various statutory hurdles in derivative litigation seeking damages tied to a corporate defendant’s alleged wrongful conduct in either the purchase or sale of securities. Plaintiffs must show the following securities fraud elements to establish fraud-based liability:

  • Misstatement or omission of a material nature (Would a reasonable shareholder deem a statement or withholding of it relevant to an investment decision?)
  • Intent to defraud (so-called “scienter” evidencing a guilty mind)
  • Link between misconduct and a security purchase or sale
  • Investor reliance on corporate wrongdoing
  • Causation (proof of nexus between misstatement or omission and plaintiff harm/damages)
  • Timeliness (time limits attach to claim filing: aggrieved parties need to be aware of temporal limitations)

Those above bullet points just touch the surface of what is comprehensively entailed in Section 10(b). The provision sets forth strong safeguards for defrauded investors, but those are best invoked following a defrauded party’s candid communication with proven legal counsel.

Further information concerning securities fraud and purposeful action that can be taken against it can be secured through close consultation with an experienced and empathetic shareholder rights legal team.

Having information at your fingertips is easier than ever. Enroll in Robbins LLP’s free investment monitoring service, Stock Watch, for notifications of corporate misconduct impacting the value of your investments, advice on how to hold corporate officers and directors accountable for their misconduct, and to receive information about class action settlements. 

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