Fraud on the Market Theory (Securities Law Series)

THIS CASEBOOK contains a selection of six U. S. Supreme Court decisions and 72 U. S. Court of Appeals decisions that analyze and interpret fraud-on-the-market theory of securities law. The selection of decisions spans from 2001 to the date of publication. The seminal case, Basic v. Levinson, 485 US 224 (1988) is also included. For each jurisdiction, the cases are listed in the order of frequency of citation. The most cited decisions appear first.

The fraud-on-the-market theory rests on the premise that certain well developed markets are efficient processors of public information. In such markets, the "market price of shares" will "reflec[t] all publicly available information." Id., at 246, 108 S.Ct. 978. Few investors in such markets, if any, can consistently achieve above-market returns by trading based on publicly available information alone, for if such above-market returns were readily attainable, it would mean that market prices were not efficiently incorporating the full supply of public information. See R. Brealey, S. Myers, & F. Allen, Principles of Corporate Finance 330 (10th ed. 2011) ("[I]n an efficient market, there is no way for most investors to achieve consistently superior rates of return.")

Amgen v. Connecticut Retirement Plans And Trust, 133 S. Ct. 1184 (2013)