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

The PSLRA requires plaintiffs to plead facts giving rise to a strong inference of scienter (intent to defraud), a heightened standard above ordinary fraud pleading.

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

Under the PSLRA, there is a rebuttable presumption that the most adequate plaintiff is the one with the largest financial interest in the relief sought by the class.

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

The fraud on the market theory creates a rebuttable presumption that investors rely on the market price, which is assumed to incorporate all material public information.

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

Rule 10b-5 under Section 10(b) of the Securities Exchange Act of 1934 is the primary vehicle for private securities fraud claims.

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

Under 28 U.S.C. § 1658, securities fraud claims must be brought within 2 years of discovery or 5 years after the violation, whichever is earlier.

Stock Lawyer Practice Test

Stock Lawyer Practice Test

Stock Lawyer Securities Fraud and Class Action Lawsuits