Securities Law: Fraud-on-the-Market Theory Demystified
The fraud-on-the-market doctrine (FOTM) is essential to class-action plaintiffs in securities fraud cases. The United States Supreme Court approved this doctrine in in 1988 in Basic v. Levinson as a means to overcome individualized reliance issues. FOTM is based on the theory that when a security is traded in an efficient market, all public information is reflected in the market price of the security and it can then be assumed that an investor who buys or sells stock at the market price relies upon all public statements. If a defendant can defeat FOTM’s rebuttable presumption, it defeats class certification and effectively prevails on the case.
The Supreme Court recently suggested it may be willing to revisit the wisdom behind FOTM. In a brief concurrence in Amgen v. Connecticut Retirement Plans & Trust Funds, Justice Alito stated that he joined the majority opinion “with the understanding that the petitioners did not ask us to revisit Basic’s fraud-¬on-the-market presumption,” and stressed that he and the three dissenting Justices believe that in light of post-Basic developments in economic theory, “reconsideration of the Basic presumption may be appropriate.
Understanding FOTM and developments in economic theory will be even more important to both shareholders and companies in future securities fraud cases. In this two-hour LIVE webcast, a panel of thought leaders and practitioners will provide an in-depth analysis of FOTM by citing relevant cases and court decisions and offering substantive information regarding its implications on the presumption of reliance in securities fraud cases, as well as class certification proceedings and materiality. In addition, this presentation will provide practical guidance to effectively use FOTM or defeat the presumption in a securities fraud case. Join us in this live, virtual webinar and get a chance to pose questions to the speakers during the live Q&A session.
Neal R. Marder , Partner and Chair, Consumer Class Actions Practice,
Winston & Strawn LLP
- Brief background on how and why the fraud on the market doctrine was created by the courts, including a very brief summary of the Cammer factors and event studies
- Defense tactics for challenging the fraud on the market presumption at the class certification stage. In this part, I will discuss my recent victory in the China Automotive Systems case, in which a federal district court denied class certification against my client based in part on the plaintiffs’ failure to establish market efficiency.
- Lastly, I will discuss recent cases bearing on the issue of rebutting the fraud on the market presumption.
Jennifer B. Poppe, Partner,
Vinson & Elkins
- The SCOTUS Amgen decision: what it held and what it expressly did not decide, including Alito’s comment and question as to whether Basic should be revisited.
- Whether Basic’s efficient-market hypothesis should be revisited and whether market movement would be a better test (this is the subject of an amicus brief that we submitted in the Amgen case). Our conclusion is that Basic should be revisited, so I can discuss the reasons why we (and likely Alito and others on the court) believe so.
- If Basic’s presumption is revisited, how this will change the approach plaintiffs and defendants should take – and what steps parties should take now to best position their cases.
Scott Rahn, Shareholder,
GREENBERG TRAURIG, LLP
- Plaintiffs’ litigation strategies
Dr. David Tabak, Senior Vice President,
NERA Economic Consulting
- How do courts weigh tests of market efficiency? (An update of my work here: https://www.nera.com/67_7815.htm)
- Going deeper into the individual tests (e.g., adjusting volume for market makers per Unger, measuring maket-maker and arbitrageur activity, measuring analyst value and activity, proper testing of price response to news)
- Beyond equity: considerations when evaluating efficiency for options and fixed-income securities.
Who Should Attend:
– Securities Attorneys
– General Counsel
– Business Lawyers
– Senior Management
Neal Marder is a partner in Winston & Strawn’s Los Angeles office, chair of the firm’s national class actions practice, and co-chair of Winston’s securities litigation practice. He concentrates his practice on class and mass actions, bet-the-company litigation, and complex business and commercial litigation.
Mr. Marder has a diverse general civil litigation practice and handles disputes in federal and state courts across the country and represents clients around the world. He regularly represents Fortune 100 companies and officers and directors in lawsuits involving business and consumer torts, class actions, mass torts, securities fraud, shareholder derivative suits, white collar, RICO, antitrust, unfair competition, as well as matters involving claims of breach of fiduciary duty arising out of M&A transactions. He has also conducted internal investigations for clients under investigation by the Department of Justice (DOJ) and Securities and Exchange Commission (SEC).
Neal Marder is a partner in Winston & Strawn’s Los Angeles office, chair of the firm’s national class actions practice, …
Jennifer focuses her litigation practice on state and federal securities litigation, officer and director liability, internal investigations, and class actions. She has successfully defended public companies, investment banks, and executives in suits filed by shareholders. Her experience includes derivative suits, shareholder class actions, disputes between master limited partnerships and their limited partners, internal investigations, and individual shareholder claims in state and federal court and arbitration. Jennifer also has significant experience in defending shareholder and consumer class actions, both within Texas and across the country. Jennifer is a frequent speaker and author on issues relating to securities litigation and the attorney-client privilege. Jennifer has been named by Texas Rising Stars in business litigation in each of the last eight years. Jennifer currently serves as Hiring Partner for the Austin office.
Jennifer focuses her litigation practice on state and federal securities litigation, officer and director liability, internal investigations, and class actions. …
Scott Rahn is a shareholder in GT’s Los Angeles office. He focuses his practice on representing international and regional financial services companies, including investment banks, private banks, broker-dealers, trust companies, investment companies, investment advisors, and hedge funds in litigated matters in federal and state courts, as well as arbitral forums such as the Financial Services Industry Regulatory Authority (“FINRA”) and the American Arbitration Association. Scott regularly represents clients in regulatory proceedings before private industry and government regulators and advises clients on their regulatory compliance obligations. Scott received his J.D. from the University of San Diego School of Law and his B.A. from the University of Wisconsin-Madison.
Scott Rahn is a shareholder in GT’s Los Angeles office. He focuses his practice on representing international and regional financial …
Dr. Tabak is a member of NERA’s Securities and Finance Practice. In the area of securities class actions, Dr. Tabak has testified on topics including class certification, liability, materiality, affected trading volume, and damage calculations. He has also testified on valuations of equity, financial derivatives, fixed-income instruments, businesses, and litigation settlements.
Dr. Tabak has published in his areas of expertise, including peer-reviewed articles in Litigation Economics Review and the Journal of Forensic Economics. His publications have covered topics such as commercial disputes, economic analysis of market efficiency, valuation discounts for lack of marketability, and the application of statistics in litigation analyses. Dr. Tabak has been an invited speaker at the Securities and Exchange Commission and a presenter at forums that provide continuing legal education credits or continuing professional education credits for appraisers.
Dr. Tabak is a member of NERA’s Securities and Finance Practice. In the area of securities class actions, Dr. Tabak …
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Method of Presentation:
On-demand Webcast (CLE)
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About Winston & Strawn LLP
Winston & Strawn LLP is an international law firm with more than 900 attorneys among 15 offices in Beijing, Charlotte, Chicago, Geneva, Hong Kong, Houston, London, Los Angeles, Moscow, New York, Newark, Paris, San Francisco, Shanghai, and Washington, D.C. The exceptional depth and geographic reach of the firm’s resources enable Winston & Strawn to manage virtually every type of business-related legal issue. It serves the needs of enterprises of all types and sizes, in both the private and the public sector.
Winston & Strawn understands that clients are looking for value beyond just legal expertise. With this in mind, the firm works hard to understand the level of involvement that its clients want from it. Please visit www.winston.com if you would like more information about Winston & Strawn’s legal services, experience, and the industries it serves.
About GREENBERG TRAURIG, LLP
Greenberg Traurig, LLP is an international, full-service law firm with approximately 1750 attorneys serving clients from 35 offices in the United States, Latin America, Europe, the Middle East and Asia. In the U.S., the firm has more offices than any other among the Top 10 on The National Law Journal’s 2012 NLJ 250. For additional information, please visitwww.gtlaw.com.
About NERA Economic Consulting
NERA Economic Consulting (www.nera.com) is a global firm of experts dedicated to applying economic, finance, and quantitative principles to complex business and legal challenges. For over half a century, NERA’s economists have been creating strategies, studies, reports, expert testimony, and policy recommendations for government authorities and the world’s leading law firms and corporations. We bring academic rigor, objectivity, and real world industry experience to bear on issues arising from competition, regulation, public policy, strategy, finance, and litigation.
NERA’s clients value our ability to apply and communicate state-of-the-art approaches clearly and convincingly, our commitment to deliver unbiased findings, and our reputation for quality and independence. Our clients rely on the integrity and skills of our unparalleled team of economists and other experts backed by the resources and reliability of one of the world’s largest economic consultancies.