Suitability claims under Rule 10b-5: are public entities sophisticated enough to use derivatives?

Article Abstract:

Public entities bringing suit against brokers or advisers for losses resulting from investment in derivative instruments should not be considered unsophisticated investors for the purpose of alleging suitability claims under Rule 10b-5. Claims that recommended investments were unsuitably risky should be limited to individual investors. Public officials should be forced to monitor investments and should not be indemnified. The misrepresentation provisions of Rule 10b-5 will adequately protect public entities if there has been any actual wrongdoing by investment advisers.

Derivatives (Financial instruments), Investment advisers, Malpractice, Institutional investments

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Company registration: toward a status-based antifraud regime

Article Abstract:

A status-based antifraud system for securities regulation would provide greater protection and less distortion than the current system or the company-based registration system proposed by the SEC Advisory Committee on the Capital Formation and Regulatory Processes. The status-based antifraud system relies on deterrence, and the level of liability depends on the issuer's market capitalization. This system makes use of market forces and minimizes the distortional impact of transaction exemptions because, unlike the Securities Act of 1933, it is not transaction-based.

Business enterprises, Business registration

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Implications of the Private Securities Litigation Reform Act of 1995 for judicial presumptions of market efficiency

Article Abstract:

Courts' reliance on 'market efficiency' when deciding securities fraud cases should utilize commonsense approaches rather than common law doctrines such as fraud-on-the-market. Congress signaled its desire for more practical approaches in passing the Private Securities Litigation Reform Act of 1995 (PSLRA). Congress moved away from financial theories and toward pragmatic views of securities litigation such as PSLRA's damages limitation provisions.

Analysis, Efficient market theory, Presumptions (Law)

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