Holding: When a securities offering is made pursuant to the Regulation D of the federal Securities Act, which provides for an exemption from registration under this law, federal law preempts any claim that the offering failed to meet the registration requirement of the state law Minn.Stat. § 80A.08 (2006). More...
Holding: In affirming the judgment of the United States District Court of Puerto which dismissed the securities fraud action initiated by the former company president (plaintiff), the Court of Appeals declared that the complaint filed by the plaintiff failed to raise a strong inference that defendants acted with the “required state of mind,” otherwise stated as “scienter,” which is provided for under Section 10(b) of the Private Securities Litigation Reform Act of 1995 (PSLRA) and Rule 10b-5 promulgated by the Securities and Exchange Commission (SEC) and defined as the “intent to deceive, manipulate, or defraud,” or recklessness that goes beyond “ordinary negligence and is closer to a lesser form of intent.” More...
Holding: If a statute is found to be ambiguous or silent on a particular point, judicial review of an agency's interpretation shall be confined to whether or not the agency's findings are based on a permissible construction of the statute. More...
Holding: The court ruled that in order to prove that there was violation of either Section 10(b) of the Exchange Act of 1934 or Rule 10b-5 of the rules promulgated thereunder, the plaintiff must demonstrate that the alleged fraud occurred “in connection with the purchase or sale of a security.” More...
Holding: The district court held that a broker can not be held liable in a securities fraud action suit in the absence of proof that there was a primary violation committed by the issuer or dealer of commercial paper as the issuer’s agent. More...
Following are Securities Law Commentaries elaborating on the significance of the most important of the Securities Law Summaries.
Commentary: In Guyden v. Aetna, 544 F.3d 376 (2nd Cir. 2008) – a case of first impression in the federal circuit courts -- the Second Circuit confirmed that arbitration provisions are enforceable against an employee who claims that her termination violated the whistleblower protections of the Sarbanes-Oxley Act. The opinion confirms the federal court’s strong support of arbitration provisions, and provides some guidance for employers seeking to implement arbitration agreements. More...
Related summary: Whistleblower Claims Arbitrable under Sarbanes-Oxley Act, Second Circuit Says
Commentary: In Douglas Millowitz v. Citigroup Global Markets et al (“In Re Salomon Analyst Metromedia Litigation”), 544 F.3d 474 (2nd Cir. 2008), the Second Circuit extended the fraud-on-the-market presumption of reliance, first set forth in Basic v. Levinson, 485 U.S. 224 (1988), to analyst reports. The Court also stated that defendants should be afforded the opportunity to rebut that presumption at the class certification stage in an effort to prevent certification. The opinion may make it harder to pursue class actions in some securities fraud cases. More...
Related summary: Second Circuit Remands Metromedia Case, Rules that Liability Presumption Now Applies to Stock Analysts as Well
Commentary: In In re Merck & Co., Inc. Securities, Derivative & “ERISA” Litig., ___ F.3d ___, 2008 WL 4138476 (3rd Cir. 2008), a federal circuit court revived a securities fraud class action suit against Merck that accuses the pharmaceutical company of hiding the truth about Vioxx and its link to cardiac problems. The district court had dismissed the class action as time barred, claiming that the plaintiffs were on inquiry notice more than two years before filing the suit. In a split decision on appeal, the Circuit Court disagreed, finding that reassuring messages from Merck and the market prevented plaintiffs from being on inquiry notice until much later. More...
Related summary: Third Circuit Reinstates Vioxx Class Action Suit Against Merck
Commentary: In its long-awaited opinion in Free Enterprise Fund v. PCAOB, 537 F.3d 667 (D.C. Cir. 2008), the Circuit Court for the D.C. Circuit upheld the Sarbanes-Oxley Act of 2002 – specifically that Act’s establishment of the Public Company Accounting Oversight Board (“PCAOB”) – against constitutional challenges. The plaintiffs argued that Act violates both the Appointments Clause of the Constitution as well as separation-of-powers principles by creating the PCAOB as a virtually independent, autonomous agency over which the President has minimal practical control and authority. The Court disagreed, finding that the Securities and Exchange Commission, over which the President has an appropriate amount of control, has sufficient legal authority over the PCAOB to support a finding that the Act is constitutional. But this case is far from over – appeals are expected, including to the U.S. Supreme Court, meaning that the future of Sarbanes-Oxley is still in question. More...
Related summary: DC Circuit Upholds Constitutionality of SEC Audit Panel
Commentary: In its highly anticipated opinion in Teamsters Local 445 Freight Div. Pension Fund v. Dynex Capital Inc., 531 F.3d 190 (2nd Cir. 2008), the Second Circuit affirmed that a securities fraud plaintiff can plead corporate scienter without specifically identifying the culpable corporate officer or director whose individual scienter could be imputed to the corporation. The plaintiff need only plead facts sufficient to establish a “strong inference” that someone in the corporation whose acts could be imputed to the corporation acted with the requisite scienter. However, the court warns that the standard for making such a pleading is very high, requiring heightened specificity. More...
Related summary: Second Circuit: Securities Class Suit Failed to Plead Corporate Scienter Against Dynex and Merit
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Investment Advisers Act of 1940 (pdf, 131kb)
Investment Company Act of 1940 (pdf, 400kb)
Sarbanes-Oxley Act of 2002 (pdf, 195kb)
Securities Act of 1933 (pdf, 241kb)
Securities Exchange Act of 1934 (pdf, 927kb)
Trust Indenture Act of 1939 (pdf, 154kb)
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