Securities Regulation

10b-5

1. Any Security
2. Jurisdictional Nexus
3. Standing/In Connection With
   • Zanford and especially Bluechip Stamps.
     • Privity is not required, but you must have actually purchased a security.
     • The defendant does not have to be a purchaser or seller. Must just be "a fraudulent scheme in which the securities transactions and breaches of fiduciary duty coincide." Zanford.
     • Focused on keeping out plaintiffs, not defendants.
4. Materiality
5. Manipulation or Deception
   • Manipulation is, like, pumping stocks.
   • Deception looks something like fraud. Ernst and Ernst.
6. Scienter
   • Scienter is knowing or having a reckless disregard for the truth. Ernst & Ernst v. Hochfelder.
7. Reliance

   Fraud on the Market

   Courts have held that people can commit fraud by deceiving the entire marketplace of traders.

   The stock must have been traded between the time of the fraud and the truth coming out.

   Material fraud gives a presumption that changes in a stock's price was caused by the fraud.

   Truth can be a defense in some way.

8. Causation
9. Proper Defendants
   • Control Person

     For control person liability under § 20(a) (and also for § 15), there must still be a primary violator.

     Control person liability will then create liability to the same extent in anyone who had control over the primary violator.

     Control

     Control means having the power to control the general affairs of an entity at the time it violated securities law and to have the power to control or influence the policies with resulted in the liability.

     After showing control, it is then the defendant's burden to prove he didn't have control. However, how it exactly works is kind of vague.

10. Economic Loss and Damages