THE "LESS THAN" EFFICIENT CAPITAL MARKETS HYPOTHESIS: REQUIRING MORE PROOF FROM PLAINTIFFS IN FRAUD-ON-THE-MARKET CASES

In 1988, the US Supreme Court in Basic Inc v Levinson created a "rebuttable" presumption of reliance for all members of a class alleging misstatements or omissions of material fact in their purchase or sale of securities of an issuer. This presumption allows a plaintiff, without any showin...

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Bibliographic Details
Published inSt. John's law review Vol. 78; no. 1; p. 81
Main Authors Ferrillo, Paul A, Dunbar, Frederick C, Tabak, David
Format Journal Article
LanguageEnglish
Published Brooklyn St. John's Law Review Association 01.01.2004
Subjects
Capital markets
Certification
Efficient markets
Federal court decisions
Federal Rules of Civil Procedure
Fraud
Hypotheses
Litigation
Market prices
Misrepresentation
Securities markets
State court decisions
Statistical data
Stockholders
Volatility
United States > US
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Summary:In 1988, the US Supreme Court in Basic Inc v Levinson created a "rebuttable" presumption of reliance for all members of a class alleging misstatements or omissions of material fact in their purchase or sale of securities of an issuer. This presumption allows a plaintiff, without any showing that he or she actually read or heard a misrepresentation, to assert, on a motion for class certification under Rule 23(b)(3) of the Federal Rules of Civil Procedure, that common issues with respect to reliance predominate over any individual issues of reliance present among the proposed class members. The Basic Court founded its decision in reliance upon the fraud on the market theory, which is premised upon the efficient capital markets hypothesis. In the years since the Supreme Court decided Basic, courts have struggled with the fraud on the market theory, fashioning their own theories, concepts, and tests to determine when a stock can be found to have traded in an "efficient" market.
ISSN:0036-2905
2168-8796