The Falsity-Scienter Inference
Wendy Gerwick Couture
University of Idaho College of Law
Securities Regulation Law Journal, Vol. 40, p. 303, 2012
This essay argues that, under certain circumstances in securities fraud cases, a statement’s well-pleaded falsity gives rise to a strong inference that the speaker acted with scienter. In particular, this essay contends that the well-pleaded falsity of a statement is sufficient to create a strong inference of scienter when (1) the truth is necessarily within the speaker’s core knowledge; and (2) the statement is sufficiently false to have necessarily caught the speaker’s attention. This falsity-scienter inference potentially applies in a variety of securities fraud contexts, including falsified CEO résumés, objectively unreasonable analyst opinions, and cooked books. In addition, the falsity-scienter inference supports adoption of the controversial “core operations inference” and provides guidance on the proper scope of this narrower inference.
Number of Pages in PDF File: 11
Keywords: Securities Regulation, Securities Litigation, Scienter, Falsity, Pleading
Date posted: September 3, 2012