Federal causes of action Flashcards
What does Rule 10b-5 govern?
Fraudulent purchase or sale of stock or other securities
Requirements for private person to file 10b-5 action
1) P BOUGHT OR SOLD security
2) transaction involved INTERSTATE COMMERCE (for fed jdx)
3) D engaged in FRAUDULENT OR DECEPTIVE conduct
4) Conduct related to MATERIAL info
5) D acted with SCIENTER
6) P RELIED on D’s conduct
7) P suffered HARM
10b-5 fraudulent or deceptive conduct
Making untrue statements of material fact OR failing to state material fact to avoid misleading
What do not count as untrue statements of material fact for 10b-5?
Opinions and predictions
10b-5 materiality
Material if reasonable investor would find fact IMPORTANT in deciding to purchase or sell security
10b-5 scienter
statements must be INTENTIONAL or RECKLESS
10b-5 computing damages
Out-of-pocket: difference between stock’s value and price plaintiff paid or received
Can you assess punitive damages under 10b-5?
NO
16-b violation
Corporate insider can be forced to return short-swing profits (made in certain timeframe) to corporation
Can reason justify insider trading?
NO, so long as bought or sold in given time period, purpose irrelevant
16b: applicable companies
ONLY corporations that are publicly traded (national security exchange) OR
Have a) assets of over 10mil and b) more than 500 shareholders
Who are corporate insiders?
Directors, officers (president, VP, secretary, treasurer, comptroller) , or shareholders with more than 10% of ANY CLASS of stock
Are transactions before becoming corporate officer subject to short-swing issues?
NO
Are transactions after becoming corporate officer subject to short-swing issues?
MAYBE
Short-swing profit rule
During any 6 month period, a corporate insider who buys and sells corporate stock is liable to corporation for PROFITS made on those transactions
