Stock Lawyer Securities Fraud and Class Action Lawsuits

Question 1

Under the Private Securities Litigation Reform Act (PSLRA) of 1995, what must a plaintiff adequately plead to survive a motion to dismiss a securities fraud claim?

Accepted Answer

Facts giving rise to a strong inference of scienter

Answer

Merely allege that the defendant made false statements

Answer

Actual damages exceeding $1 million

Answer

File a complaint within 5 years of the alleged fraud

Question 2

In a securities class action lawsuit, the 'lead plaintiff' is presumed to be:

Accepted Answer

The plaintiff with the largest financial interest in the outcome

Answer

The first plaintiff to file the complaint

Answer

The plaintiff whose attorney has the most experience

Answer

A government agency such as the SEC

Question 3

The 'fraud on the market' theory established in Basic Inc. v. Levinson (1988) presumes that:

Accepted Answer

Investors rely on the integrity of the market price, which reflects all public information

Answer

Any stock price decline constitutes evidence of fraud

Answer

All investors who purchased shares are automatically entitled to damages

Answer

Securities fraud only applies to publicly traded companies

Question 4

What provision provides the primary basis for private securities fraud lawsuits in federal court?

Accepted Answer

Securities Exchange Act of 1934, Rule 10b-5

Answer

Securities Act of 1933, Section 11

Answer

Investment Advisers Act of 1940, Section 206

Answer

Sarbanes-Oxley Act of 2002, Section 304

Question 5

The statute of limitations for private securities fraud claims under the Sarbanes-Oxley Act is:

Accepted Answer

2 years from discovery, or 5 years from the violation

Answer

1 year from discovery, or 3 years from the violation

Answer

3 years from discovery, or 7 years from the violation

Answer

6 months from discovery, or 2 years from the violation

Question 6

In securities class action litigation, 'loss causation' as established in Dura Pharmaceuticals v. Broudo (2005) requires plaintiffs to prove:

Accepted Answer

The alleged fraud directly caused the plaintiff's economic loss

Answer

The defendant's misrepresentation was material to investors

Answer

The stock price declined at some point during the class period

Answer

The defendant had actual knowledge of the falsity of all statements

Question 7

Which of the following is NOT a required element in a private Rule 10b-5 securities fraud claim?

Accepted Answer

A prior criminal conviction of the defendant

Answer

A material misrepresentation or omission

Answer

Scienter (intent to deceive or reckless disregard)

Answer

Connection with the purchase or sale of a security