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Securities Litigation and Enforcement

Overview

CITATIONS
 
Section 10(b) of the Securities Exchange Act of 1934 = 15 U.S.C. § 78(j)(b)
 
Rule 10b-5 = 17 C.F.R. § 240.10b-5 

Treatises

The Statute

15 U.S.C.A. § 78j 
 
It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange--
(a)
(1) To effect a short sale, or to use or employ any stop-loss order in connection with the purchase or sale, of any security other than a government security, in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.
(2) Paragraph (1) of this subsection shall not apply to security futures products.
 
(b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, or any securities-based swap agreement any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.

The Regulation

17 C.F.R. § 240.10b-5
 
§ 240.10b–5 Employment of manipulative and deceptive devices.
 
It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.
 
(Authority: Sec. 10; 48 Stat. 891; 15 U.S.C. 78j)

Journal Articles

1. Julie A. Herzog, Fraud Created the Market: An Unwise and Unwarranted Extension of Section 10(B) and Rule 10(B)-5, 63 Geo. Wash. L. Rev. 359 (1995).

2. Paul S. Milich, Securities Fraud under Section 10(B) and Rule 10(B)-5: Scienter, Recklessness, and the Good Faith Defense, 11 J. Corp. L. 179 (1986).

3. Charles B. Nutley, Triggering One-Year Limitations on Section 10(B) and Rule 10(B)-5 Actions: Actual or Inquiry Discovery, 30 San Diego L. Rev. 917 (1993).

4. Andrew S. Gold, Reassessing the Scope of Conduct Prohibited by Section 10(B) and the Elements of Rule 10(B)-5: Reflections on Securities Fraud and Secondary Actors, 53 Cath. U. L. Rev. 667 (2004).

5. Eric C. Chaffee, Standing Under Section 10(B) and Rule 10(B)-5: The Continued Validity of the Forced Seller Exception to the Purchaser-Seller Requirement, 11 U. Pa. J. Bus. L. 843 (2009).

6. David J. Baum, The Aftermath of Central Bank of Denver: Private Aiding and Abetting Liability Under Section 10(B) and Rule 10(B)-5, 44 Am. U. L. Rev. 1817 (1995).

7. Eric. C. Chaffee, Beyond Blue Chip: Issuer Standing to Seek Injunctive Relief Under Section 10(B) and Rule 10(B)-5 Without the Purchase or Sale of a Security, 36 Seton Hall L. Rev. 1135 (2006).

8. Ronald B. Lee, The Measure of Damages under Section 10(B) and Rule 10(B)-5, 46 Md. L. Rev. 1266 (1987).

9. James S. O'Shaughnessy, Judicial Implication of Contribution under Section 10(B) of the Securities Exchange Act is the New Branch on the Judicial Oak Threatened by Strict Statutory Construction?, 16 Suffolk U. L. Rev. 983 (1982).

10. Scott M. Murray, Central Bank of Denver v. First Interstate Bank of Denver: The Supreme Court Chops a Bough from the Judicial Oak: There is No Implied Private Remedy to Sue for Aiding and Abetting Under Section 10(B) and SEC Rule 10(B)-5, 30 New Eng. L. Rev. 475 (1996).

11. Devin F. Ryan, Yet Another Bough on the "Judicial Oak" : The Second Circuit Clarifies Inquiry Notice and Its Loss Causation Requirement under the PSLRA in Lentell v. Merrill Lynch & Co., 79 St. John's L. Rev. 485 (2005).

12. J. Dormer Stephen III, U.S. v. O'Hagan: The Misappropriation Theory under Section 10(B) and Rule 10(B)-5 -- Can the Judicial Oak Grow any Higher?, 102 Dick. L. Rev. 277 (1998).

13. Rodney D. Chrisman, Stoneridge v. Scientific-Atlanta: Do Section 10(B) and Rule 10(B)-5 Require a Misstatement or Omission?, 26 Quinnipiac L. Rev. (2008).

14. Katherine H. Brown, SEC Civil Remedies for Insider Trading Actions under Section 10(B) of the Securities Exchange Act of 1934 and Rule 10(B)-5, 57 U. Cin. L. Rev. 679 (1988).

15. Brandy L. Fulkerson, Extraterritorial Jurisdiction and U.S. Securities Law Seeking Limits for Application of the 10(B) and 10(B)-5 Antifraud Provisions, 92 Ky. L.J. 1051 (2003-04).

16. Audrey V. Nelson, Section 10(B) and Rule 10(B)-5 Federal Securities Law Claims: The Need for the Uniform Disposition of the Arbitration Issue, 24 San Diego L. Rev. 199 (1987).

17. Francine A. Ritter, Accountability of the Independent Accountant as Auditor in the Wake of Central Bank: Does the Implied Private Right of Action Survive under Section 10(B) and Rule 10(B)-5?, 31 Suffolk U. L. Rev. 873 (1998).

18. Elliot Brecher, The Misappropriation Theory: Rule 10(B)-5 Insider Liability for Nonfiduciary Breach, 15 Fordham Urb. L.J. 1049 (1986-87).

19. Denise Rodosevich, Obtaining Uniformity for Section 10(B) and Rule 10(B)-5 Causes of Action, 22 Conn. L. Rev. 525 (1990).

20. Cristy B. Bell, Investor Protection After McMahon: The Arbitrability of Claims Arising under Section 10(B) of the Securities Exchange Act of 1934 and SEC Rule 10(B)-5, 13 Del. J. Corp. L. 537 (1988).

21. Adam S. Affleck, Apportioning Contribution in Section 10(B) and Rule 10(B)-5 Multi-Defendant Suits: A Critique of Relative Culpability Shares in the Wake of Smith V. Mulvaney, 1988 B.Y.U. L. Rev. 409 (1988).

22. Ginger E. Margolin, Securities -- Fraud -- Private Plaintiffs May Not Maintain Aiding and Abetting Suits under Securities Exchange Act Section 10(B) and Securities and Exchange Commission Rule 10(B)-5, 26 St. Mary's L.J. 601 (1995).

23. Christopher R. Stone, Implying a Right of Contribution under Section 10(B) of the Securities Exchange Act of 1934 and Rule 10(B)-5: The Supreme Court Finds Power Where None Exists, 35 B.C. L. Rev. 175 (1993).

24. W. Taylor Marshall, Securities Law -- The Securities Exchange Act of 1934 -- 'Round and 'Round We Go: The Supreme Court Again Limits the Circumstances in Which Federal Courts May Hold Secondary Actors Liable Under Section 10(B) and SEC Rule 10(B)-5. Stoneridge Investment Partners LLC v. Scientific-Atlanta, Inc. 552 U.S. 148 (2008), 31 U. Ark. Little Rock L. Rev. 197 (2008).

25. Laura L. Worsham, Securities Regulation -- Fraud -- Scienter Must Be Established for the SEC to Obtain Injunctive Relief for Violations of Section 17(A) of the Securities Act of 1933, and Section 10(B) and Rule 10(B)-5 of the Securities Exchange Act of 1934, 12 St. Mary's L.J. 754 (1981).

26. Nancy A. Smolensky, Rights Among Wrongdoers: SEC Enforcement Actions and the Right to Contribution under Section 10(B) and Rule 10(B)-5, 63 Geo. Wash. L. Rev. 444 (1995).

27. Gary M. Bishop, A Framework for Analyzing Attorney Liability under Section 10(B) and Rule 10(B)-5, 10 U. N.H. L. Rev. 193 (2012).

28. Robin L. Filion, Recent Judicial and Statutory Changes Impacting the Maintenance of Securities Actions Filed under Section 10(B) and Rule 10(B)-5, 14 U. Haw. L. Rev. 581 (1992).

29. Eric C. Chaffee, An Oak is an Oak is an Oak is an Oak: The Disappointing Entrenchment in Halliburton Co. v. Erica P. John Fund of the Implied Private Right of Action under Section 10(B) and Rule 10(B)-5, 9 N.Y.U. J. L. & Liberty 92 (2015).

30. Holly McCann, Securities Exchange Act -- Breach of Corporate Fiduciary Duty -- The U.S. Court of Appeals for the Third Circuit Ruled that a Company that Adopted a Shareholder's Right Plan Did Not Violate Section 10(B) of the Securities Exchange Act or Rule 10(B)-5, Since the Corporate Officers and Board Members Did Not Omit Facts or Misinform the Public as to Any Material Matter Regarding the Plan, 31 Dug. L. Rev. 231 (1992).

31. Robert Van Der Veire, Secondary Liability under Section 10(B) of the Securities Act of 1934 and Rule 10(B)-5 Post-Stoneridge, 25 J. Civ. Rts. & Econ. Dev. 999 (2011).

32. Taylor Wirth, A Claim for Violations of § 10(B) of the Securities Exchange Act and SEC Rule 10(B)-5 Requires a Plaintiff to Prove that the Defendant's Representation or Omission Materially Affected the "Total Mix" of Information Made Available to a Reasonable Investor: Matrixx Initiatives v. Siracusano, 563 U.S. 27 (2011), 13 Transactions: Tenn. J. Bus. L. 193 (2011).

33. Andrew Sumner, A Private Right of Action Exists for Violations of § 10(B) and Rule 10(B)-5 under the Securities Exchange Act Where a Plaintiff Can Establish a Material Misrepresentation by the Defendant, Scienter, A Relationship Between the Misrepresentation and the Purchase or Sale of a Security, Reliance Upon the Misrepresentation, Economic Loss, and Loss Causation: Ind. St. Dist. Council of Laborers v. Omnicare, Inc., 583 F.3d 935 (6th Cir. 2009), 11 Transactions: Tenn. J. Bus. L. 256 (2010).

34. Robert S. Bournias, Federal Civil Procedure -- Standing -- Absent Injury Within the Zone of Protection Established under Section 10(B) and Rule 10(B)-5, Standing to Assert a Cause of Action is Denied, Regardless of the Relief Sought: Trump Hotels & Casino Resorts, Inc. v. Mirage Resorts, Inc., 140 F.3d 478 (3d Cir. 1998), 29 Seton Hall L. Rev. 369 (1998).

35. Christopher G. Lazarini, Securities Law -- Short v. Belleville Shoe Manufacturing Co: A Short Proposal for the Adoption of a Uniform Federal Limitations Period for Section 10(B) and Rule 10(B)-5, 21 Mem. St. U. L. Rev. 147 (1990).

36. Matthew B. Arnould, A Maverick Achieves Something Nobler than Simple Rebellion: Why Shareslueth is Legal under Section 10(B) and Rule 10(B)-5, and Why it Should Remain that Way, 103 Nw. U. L. Rev. 335 (2009).

37. Gregory M. Matlock, Greenhouse v. MCG Capital Corp: Is a Senior Manager's Educational Background Material under Federal Securities Law?, 8 T.M. Cooley J. Prac. & Clinical L. 229 (2006).