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Section 10(b) of the Securities Exchange Act of 1934 and the SEC's Rule 10b-5 promulgated thereunder comprise a mechanism that broadly prohibits fraud in connection with the purchase or sale of securities. The judiciary supplemented that mechanism by implying a private right of action under which victims of securities fraud may pursue remedies for their losses against perpetrators. But some in Congress and some in the judiciary perceived that the litigation process was too easily converted into a tool by crafty securities litigants to pressure defendants into settlement — even when the securities-fraud claims had no basis in law and fact.
There must be balance. Wronged investors should be able to recover for wrongs resulting from fraudulent conduct, but that remedy should not be so broad that it discourages legitimate business. Congress and the judiciary have struggled to strike this balance and establish the appropriate contours of the 10b-5 mechanism. In recent decades, these institutions have restricted the 10b-5's substantive elements and refined its procedural pathways. In an effort to balance the need to afford defrauded investors a remedy with the need to promote honest business, the 10b-5 mechanism contains several access barriers to remedies for securities-fraud victims.
This book is a comprehensive resource for litigators, judges, and scholars who need to understand these access barriers and to navigate a securities-fraud action. First, this book approaches private securities litigation chronologically, starting with investigating a claim and ending with settlement and jury instructions. Along the way, the book tackles preliminary motions, discovery, challenges with using experts, class certification, opt-out litigation, and trial. Second, this book covers several topics still developing in the law, including chapters dedicated to the emerging jurisprudence governing investigating private securities-fraud claims, confidential witnesses, fraud on the market and class certification, expert testimony and loss causation, the extraterritorial application of the securities laws, and the growing trend of opt-out litigation. Third, this book aims to be user friendly, relying on key opinions and statutes. In this fashion, the book provides a reliable reference for those confronted with issues in securities-fraud litigation.