fraud on the market theory

• Class Action Allowed Under Fraud-On-the-Market Theory, Rules 9th Circuit

A securities fraud class action could proceed under a presumption that individual class members relied on the defendant's alleged misrepresentations, the 9th Circuit has ruled in affirming certification. The plaintiff filed a putative class action alleging that biotechnology company Amgen committed securities fraud in violation of Rule 10b-5 of the Securities Exchange Act. Specifically, the plaintiff alleged that Amgen and several company officers misled investors by misstating or failing to disclose safety concerns that the Food and Drug Administration had about two Amgen products used to treat anemia.

• Lawyers USA
• November 17, 2011

• Solving a profound flaw in fraud-on-the-market theory: utilizing a derivative of arbitrage pricing theory to measure Rule 10b-5 damages.

The capital asset-pricing model (CAPM) is ill-suited to be used to measure damages in Rule 10b-5 securities misrepresentation cases because the information is focused on predicting future returns. Efficient market theories like the CAPM are designed to assist portfolio managers in projecting future returns. Damages in securities fraud cases should be focused on what the historical data would have looked like but for the misrepresentation. Methods of damage measurement should be based on arbitrage pricing theory.

• University of Pennsylvania Law Review
• Vol. 145 Nbr. 5, May 1997

• The 'Fraud-on-the-Market' Theory

I acknowledge the assistance of Raymond W. Henney, Esq., Ruth E. Zimmerman, Esq., and David A. Brown, Esq. "I can calculate the motions of t...

• Mondaq Business Briefing
• United States Law Articles in English

• Vioxx Suit Improperly Certified As Class Action, Rules Kentucky Court of Appeals

A product liability suit concerning the pain killer Vioxx could not be certified as a class action under a "fraud-on-the-market" theory of liability, the Kentucky Court of Appeals has ruled in reversing judgment. The plaintiff took Vioxx for his chronic osteoarthritis before Merck withdrew the drug from the market in 2004. Although the plaintiff alleges that he experienced chest pains, there is no evidence that he sustained any cardiovascular injury as a result of taking the prescription drug.

• Lawyers USA
• March 02, 2012

• Erica P. John Fund, Inc. v. Halliburton Co., 563 U.S. (2011)

... on the merits in a private securities fraudaction, investors must demonstrate that the defendant'sde...-5 plaintiffwho has traded on an impersonal market." Id., at 245.We also observed that "[r]equiring ... what is known as the"fraud-on-the-market" theory. According to that theory,"the market price of...

• U.S. Supreme Court

• Justices of U.S. Supreme Court to Examine Class Certification in Securities Fraud Case

The U.S. Supreme Court will decide whether a securities plaintiff must establish loss causation at the time of class certification when suing under a "fraud on the market" theory. The Court agreed to review a 5th Circuit decision denying class certification in a securities fraud case against Halliburton Co.

• Lawyers USA
• January 17, 2011

• Supreme Court Appears To Hand Unanimous Victories To Investors, But Leaves Lots Of Openings For Defendants.

... alter the landscape of securities fraud litigation. In Matrixx Initiatives, Inc., et al. v... that plaintiffs relying on a fraud-on-the-market theory need also prove loss causation at the class...

• Mondaq Business Briefing
• Nbr. 2011, January 2011

• The Plight of the Private Securities Litigation Reform Act in the Post-Enron Era: The Ninth Circuit's Interpretation of Materiality in Employer-Teamster V. America West

This note begins with a brief discussion and background of the 1934 Securities Exchange Act and the 1995 Private Securities Litigation Reform Act (PSLRA), paying particular attention to the development of the fraud-on-the-market theory under the 1934 Act and the PSLRA. It then provides the factual and procedural background of the 2003 America West decision. The article advances two primary arguments: 1. The Ninth Circuit properly rejected the Third Circuit's bright-line rule that a misrepresentation or omission is immaterial as a matter of law if the market fails to immediately react upon disclosure of the alleged misrepresentation or omission. 2. The PSLRA should survive the post-Enron era, but the status of the fraud-on-the-market theory and, most importantly, the appropriate standard...

• Brigham Young University Law Review
• Vol. 2004 Nbr. 2, January 2004

• Colorado Supreme Court Says Insurer Can't Be Sued Under Market Fraud Theory

Plaintiffs who brought a class action against insurance companies for violating a state consumer protection statute can't use a "fraud on the market" theory because the plaintiffs relied on face-to-face transactions, not market price, the Colorado Supreme Court has ruled in reversing class certification. Plaintiffs alleged that the insurers sold them uninsured/ underinsured motorist (UM/IUM) coverage on additional vehicles that did not provide any meaningful benefit.

• Lawyers USA
• May 01, 2009

• Treasury Inc.: How the Bailout Reshapes Corporate Theory and Practice

Corporate law theory and practice considers shareholder relations with companies and the implications of ownership separated from control. Yet through the Troubled Asset Relief Program (TARP) bailout and the government's resultant shareholding, ownership and control at many companies have merged, leaving corporate theory and practice for the financial and automotive sectors in chaos. The government's $700 billion bailout is a unique historical event; not merely because of its size, but also because of a resulting ripple through corporate scholarship and practice. This article builds on the author's five testimonies before Congress during the financial crisis and implementation of the TARP bailout and his consultation for the Special Inspector General for TARP. After considering corporat...

..., would be permitted to sell them into the market and allow other non-governmental shareholders to e... disclosure laws, registration requirements, fraud provisions, and other rules is a powerful one. Acc...

• Yale Journal on Regulation
• Vol. 27 Nbr. 2, July 2010