Mismatch: The Misuse of Market Efficiency in Market Manipulation Class Actions

51 Pages Posted: 7 Jul 2010

See all articles by Charles Korsmo

Charles Korsmo

Case Western Reserve University School of Law

Abstract

Plaintiffs commonly bring two distinct types of claims under Section 10(b) of the Securities Exchange Act of 1934: 1) claims of material misrepresentations or omissions; and 2) claims of trade-based market manipulation. Despite the distinctive features of the two types of claims, courts have tended to treat them identically when applying the “fraud on the market” doctrine. In particular, courts have required both types of plaintiffs to make identical showings that the relevant security traded in an “efficient market” in order to gain a presumption of reliance. The reasons for requiring such a showing by plaintiffs in a misrepresentation case are, however, inapplicable in market manipulation cases. Plaintiffs alleging market manipulation should not be required to demonstrate an efficient market in order to benefit from the fraud on the market doctrine’s presumption of reliance. If plaintiffs are made to make any showing at all, it should be a showing of loss causation.

Keywords: Securities Regulation, Securities Litigation, Fraud on the Market, Market Manipulation

Suggested Citation

Korsmo, Charles, Mismatch: The Misuse of Market Efficiency in Market Manipulation Class Actions. William & Mary Law Review, Forthcoming, Brooklyn Law School, Legal Studies Paper No. 193, Available at SSRN: https://ssrn.com/abstract=1635867

Charles Korsmo (Contact Author)

Case Western Reserve University School of Law ( email )

11075 East Boulevard
Cleveland, OH 44106-7148
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
226
Abstract Views
1,229
Rank
246,374
PlumX Metrics