NCJ Number
130653
Journal
St. John's Law Review Volume: 65 Issue: 2 Dated: (Spring 1991) Pages: 441-466
Date Published
1991
Length
26 pages
Annotation
This analysis of courts' use of the fraud-on-the-market theory in decisions on class actions regarding securities fraud concludes that this theory is best applied in connection with a substantive theory of class action suits.
Abstract
The theory is based on the premise that the price of securities traded on efficient capital markets reflects all relevant publicly available information and that relevant misrepresentations defraud investors regardless of whether the investors directly rely on the misrepresentations, because the misrepresentations unfairly affect the market price of securities. The substantive theory of class actions not only justifies application of the fraud theory but also provides the most useful theoretical framework for analyzing class certification issues arising from such application. Under this theory, proof of a fraud on the market is viewed as representing, for the class as a whole, proof of reliance on the misrepresentation. Footnotes