REAGANOMICS: A PHILOSOPHICAL AND ALMOST MIDTERM PERSPECTIVE

Political Economy,

AN INQUIRY INTO THE PERCEPTION OF MATERIALITY AS AN ELEMENT OF SCIENTER UNDER SEC RULE 10b-5

In any private action or enforcement proceeding based on SEC Rule 10b-5 the plaintiff, including the Securities and Exchange Commission, must prove that the defendant engaged in deception or manipulation with scienter, that is, an intent to deceive (which lower courts have held encompasses reckless conduct). Where the gravamen of the claim is deception, the deception must have been material. A fact, including forward-looking information, is material if there is a substantial likelihood that a reasonable shareholder would consider the fact important in making his investment decision. This Article demonstrates that in an appropriate case an assessment of whether the defendant acted with scienter should consider whether the defendant appreciated the materiality of an omitted or misrepresented fact. As one example, an insider who traded in the securities of his employer while he was aware of nonpublic information should not be found to have acted with scienter, if, before trading, he made a good faith evaluation of that information, including (but not necessarily) consulting with counsel, and concluded that the information was not material, even though a trier of fact later found that the information was material when the trade occurred

COVID-19 and Rule 10b-5

The COVID-19 pandemic presented wide-ranging challenges for businesses. Not the least of these is compliance with federal securities laws, including the prohibition—most notably under SEC Rule 10b-5—on materially deceptive statements made to the public. Both the SEC, in its role as enforcer of the law, and private parties, seeking to represent classes of aggrieved investors, have filed complaints asserting that corporations and others have engaged in deception of investors regarding matters pertaining to COVID-19. Some of these claims relate to disclosures regarding testing kits for the virus as well as development of vaccines. Other complaints allege faulty disclosure on the effect of the pandemic on the market for a company’s products and services that are not themselves related to the pandemic, such as claims against cruise lines that suspended operations. This article presents the legal framework for claims based on Rule 10b-5, SEC guidance on how COVID-19 affects compliance with disclosure requirements for public companies, and the issues that have emerged in the claims already filed. This analysis demonstrates that almost any public reporting company faces the risk of inadequate disclosure and the temptation to withhold or misstate material facts in a time of financial stress

Leave truth alone: on deflationism and contextualism

According to deflationism, grasp of the concept of truth consists in nothing more than a disposition to accept a priori (non-paradoxical) instances of the schema:(DS) It is true that p if and only if pAccording to contextualism, the same expression with the same meaning might, on different occasions of use, express different propositions bearing different truth-conditions (where this does not result from indexicality and the like).On this view, what is expressed in an utterance depends in a non-negligible way on the circumstances. Charles Travis claims that contextualism shows that ‘deflationism is a mistake’, that truth is a more substantive notion than deflationism allows. In this paper, I examine Travis's arguments in support of this ‘inflationary’ claim and argue that they are unsuccessful

Protein folding in mitochondria requires complex formation with hsp60 and ATP hydrolysis

Mitochondrial heat-shock protein hsp60 functions in the folding of proteins imported into mitochondria. Folding occurs at the surface of hsp60 in an ATP-mediated reaction, followed by release of the bound polypeptides. We propose that hsp60 catalyses protein folding

WHEN THE CORPORATE LUMINARY BECOMES SERIOUSLY ILL: WHEN IS A CORPORATION OBLIGATED TO DISCLOSE THAT ILLNESS AND SHOULD THE SECURITIES AND EXCHANGE COMMISSION ADOPT A RULE REQUIRING DISCLOSURE?

Recent speculation and rumors about the health of senior corporate executives of public companies (most notably Steve Jobs of Apple Inc.) and the advanced age of many leaders in the corporate community prompt a consideration of when, if at all, there must be public disclosure of the ill health of a person whose involvement in a corporation is perceived as vital to the continued financial success or independence of that company. This Article addresses the application of various disclosure requirements under the Securities Exchange Act of 1934 to facts regarding the health of a corporate luminary. An adverse development in the health of a luminary that has, or may have, an adverse material impact on the company may not trigger an immediate disclosure obligation. There are, however, numerous situations where ill health with an adverse material corporate impact may have to be disclosed. In order to avoid uncertainty in this area – since there are competing views on the application of Exchange Act disclosure principles to personal health-related facts – this Article proposes a rule for adoption by the Securities and Exchange Commission that would impose a disclosure requirement in narrow circumstances

AN INQUIRY INTO THE PERCEPTION OF MATERIALITY AS AN ELEMENT OF SCIENTER UNDER SEC RULE 10b-5

In any private action or enforcement proceeding based on SEC Rule 10b-5 the plaintiff, including the Securities and Exchange Commission, must prove that the defendant engaged in deception or manipulation with scienter, that is, an intent to deceive (which lower courts have held encompasses reckless conduct). Where the gravamen of the claim is deception, the deception must have been material. A fact, including forward-looking information, is material if there is a substantial likelihood that a reasonable shareholder would consider the fact important in making his investment decision. This Article demonstrates that in an appropriate case an assessment of whether the defendant acted with scienter should consider whether the defendant appreciated the materiality of an omitted or misrepresented fact. As one example, an insider who traded in the securities of his employer while he was aware of nonpublic information should not be found to have acted with scienter, if, before trading, he made a good faith evaluation of that information, including (but not necessarily) consulting with counsel, and concluded that the information was not material, even though a trier of fact later found that the information was material when the trade occurred

CLEANING THE MURKY SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS: AN INQUIRY INTO WHETHER ACTUAL KNOWLEDGE OF FALSITY PRECLUDES THE MEANINGFUL CAUTIONARY STATEMENT DEFENSE

Congress included a safe harbor for forward-looking statements in the 1995 Private Securities Litigation Reform Act. This affords certain issuers and other specified persons limited protection from civil liability for damages under the Securities Act of 1933 and the Securities Exchange Act of 1934 when the projections or objectives in a forward-looking statement are not realized, i.e., turn out to be false. The safe harbor contains two principal elements, in addition to protection for immaterial statements: one prong where projections are accompanied by meaningful cautionary statements, the second prong where the plaintiff fails to prove that the speaker made the statement with actual knowledge that it is false or misleading. This article reviews the legislative history of the safe harbor, the divergent lines of case law interpreting it and extensive commentary on how the safe harbor should be applied. The conclusion of this analysis is that the first prong is available as a complete defense without regard to the state of mind or intent of the speaker, so that (1) the second prong does not apply when the first prong is satisfied and (2) statements are not deemed not meaningful because a risk factor that rendered the forward-looking statement unlikely to be realized was knowingly omitted from the cautionary statements. Although there may be policy reasons why the safe harbor should have been different, this interpretation is compelled by the language of the statute and the legislative history, including the bespeaks caution line of cases on which the statutory safe harbor was based, and judicial and scholarly analyses to the contrary are flawed