The Falsity-Scienter Inference

Securities Regulation Law Journal, Vol. 40, p. 303, 2012

11 Pages Posted: 3 Sep 2012  

Wendy Gerwick Couture

University of Idaho College of Law

Date Written: 2012

Abstract

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.

Keywords: Securities Regulation, Securities Litigation, Scienter, Falsity, Pleading

Suggested Citation

Couture, Wendy Gerwick, The Falsity-Scienter Inference (2012). Securities Regulation Law Journal, Vol. 40, p. 303, 2012. Available at SSRN: https://ssrn.com/abstract=2138225

Wendy Gerwick Couture (Contact Author)

University of Idaho College of Law ( email )

PO Box 83720
Boise, ID 83720-0051
United States
208-364-4547 (Phone)

HOME PAGE: http://www.uidaho.edu/law/people/faculty/wgcouture

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