<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>Investors are entitled to assume that issuers comply with regulatory disclosure requirements and have therefore purchased or sold a security at a price expected to have been set without being affected by untrue statements or omissions. That is, investor reliance should be presumed in a regulated market in which the issuer statements in SEC filings are truthful and at least not seriously misleading. This article argues that the source of reliance lies in the credibility of the regulators committed to promoting market integrity and investor protection. In this regard, the basic presumption per se remains valid but needs some revision. Furthermore, in assessing claims of causation of loss and damages, it should be taken into account whether any significant price distortion occurred at the precise moment when defrauded investors made investment decisions, not at a later date. Such ex-ante analysis is theoretically sound and consistent with legislative intent.</p>
</abstract>

Investors are entitled to assume that issuers comply with regulatory disclosure requirements and have therefore purchased or sold a security at a price expected to have been set without being affected by untrue statements or omissions. That is, investor reliance should be presumed in a regulated market in which the issuer statements in SEC filings are truthful and at least not seriously misleading. This article argues that the source of reliance lies in the credibility of the regulators committed to promoting market integrity and investor protection. In this regard, the basic presumption per se remains valid but needs some revision. Furthermore, in assessing claims of causation of loss and damages, it should be taken into account whether any significant price distortion occurred at the precise moment when defrauded investors made investment decisions, not at a later date. Such ex-ante analysis is theoretically sound and consistent with legislative intent.

Theories of Causal Nexus in Rule 10b-5 Claims: A Critical Reassessment

Law and Business

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

{"article-title":"Theories of Causal Nexus in Rule 10b-5 Claims: A Critical Reassessment"}

Investors are entitled to assume that issuers comply with regulatory disclosure requirements and have therefore purchased or sold a security at a price...

Theories of Causal Nexus in Rule 10b-5 Claims: A Critical Reassessment

Article Category: Research Article

Published Online: Dec 31, 2022

Page range: 5 - 19

DOI: https://doi.org/10.2478/law-2022-0002

Keywords
transaction causation, loss causation, fraud-on-the market doctrine, fraud-created-the-market theory, artificially inflated purchase price theory

© 2023 Min-woo Kang, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Theories of Causal Nexus in Rule 10b-5 Claims: A Critical Reassessment

Article Category: Research Article

Published Online: Dec 31, 2022

Page range: 5 - 19

DOI: https://doi.org/10.2478/law-2022-0002

Keywordstransaction causation, loss causation, fraud-on-the market doctrine, fraud-created-the-market theory, artificially inflated purchase price theory

© 2023 Min-woo Kang, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Keywords
transaction causation, loss causation, fraud-on-the market doctrine, fraud-created-the-market theory, artificially inflated purchase price theory