Opinions Actionable as Securities Fraud
67 Pages Posted: 20 May 2012 Last revised: 26 Mar 2013
Date Written: May 17, 2012
This Article proposes a new analytical framework to apply to statements of opinion in securities fraud cases. Although statements of opinion form the basis of some of the most cutting-edge securities fraud claims - such as those asserted against securities analysts and credit rating agencies - statements of opinion do not fit squarely within the elements of securities fraud. In particular, three issues arise: (1) When is a statement of opinion "false" so as to qualify as a misrepresentation? (2) When is a statement of opinion "material"? (3) And, for that matter, what is the distinction between a statement of fact and a statement of opinion? Courts confronting these issues apply various analytically unsound and inconsistent tests. In response, this Article proposes a novel approach, drawing on the policy rationales underlying securities fraud claims, case law and scholarly commentary addressing how to apply the elements of securities fraud to statements of opinion, and comparable analyses in the contexts of common law fraud and defamation. First, this Article argues that statements of opinion are only false if both objectively unreasonable and subjectively disbelieved. Second, this Article proposes the following new "evaluation-inference" test" to differentiate statements of opinion from statements of fact: Does the statement express the speaker's evaluation or inference of facts? Finally, this Article proposes the following new "reasonable implication test" to distinguish opinions that are immaterial as a matter of law from those that are potentially material: Does the opinion reasonably imply an allegedly false, material fact?
Keywords: Securities Fraud, Securities Regulation, Securities Litigation, Opinions, Defamation
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