Is This the End for Fraud-on-the-Market Doctrine?
Lane Powell Shareholder Doug Greene authored a November 20 Law360 article titled “Is This the End for Fraud-on-the-Market Doctrine?” In the article Greene discussed the fraud-on-the-market presumption of reliance — a theory in securities fraud cases which allows plaintiffs to establish class-wide reliance — that provides that a security traded on an efficient market reflects all public material information. Purchasers (or sellers) rely on the integrity of the market price, and thus on a material representation. Greene explained the theory as it relates to Basic v. Levinson, the U.S. Supreme Court decision endorsing the theory and establishing the presumption of reliance based on it; John Fund Inc. v. Halliburton Co.; and Amgen Inc. v. Connecticut Retirement Plans, as well as three possible outcomes for the future of the fraud-on-the-market doctrine.
At long last, the United States Supreme Court is going to address the viability and/or prerequisites of the fraud-on-the-market presumption of reliance established by the court in 1988 in Basic v. Levinson. Securities litigators, on both sides of the aisle, are understandably anxious because our entire industry is about to change — either a little or a lot.