Jenna Koleson


Section 10(b) of the 1934 Securities and Exchange Act is the broadest anti-fraud provision within securities laws and is enforced through Rule 10b-5, which makes it unlawful for any person, in connection with the purchase or sale of any security, to defraud, misrepresent material facts, omit material facts, or engage in any practice which operates as fraud or deceit upon any person. In promulgating Section 10(b) and Rule 10b-5, Congress, and the SEC by way of Congressional authority, designed these laws to encompass the infinite variety of devices by which undue advantage could be taken of investors and corporations. Another goal of Section 10(b) and Rule 10b-5 is the need to protect the security market’s integrity from abuses by those with access to material nonpublic information that would affect the price of a corporation’s securities upon public disclosure.

Individuals are capable of finding creative ways to manipulate the market, and in turn, courts must also be creative in holding those individuals accountable for their fraudulent behavior. While the concept that an issuer has a duty to correct their own statements has widespread judicial and academic acceptance, when does an issuer have a duty to correct misleading statements made by third parties, such as reporters and financial analysts? What about statements made by coworkers or fellow executive officers? The diversity of circuit opinions demonstrates that any given Rule 10b-5 claim is unique and rarely allows for a single coherent answer. Thus, this Note proposes that the Supreme Court should adopt a case-by-case, contextual approach for analyzing Rule 10b-5 violations.

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