The Oyez Project: Economic Activity Issues - Securities Decisions

Aaron v. SEC

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Basic Inc. v. Levinson

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Blau v. Lehman

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Blue Chip Stamps v. Manor Drug Stores

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Board Of Govs., Frs v. Investment Company Inst.

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Burks v. Lasker

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Central Bank Of Denver, N. A. v. First Interstate Bank Of Denver, N. A.

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Chiarella v. United States

Did Chiarella violate Section 10(b) of the 1934 Act by failing to disclose the impending takeover before trading in the target company's securities?

No. A duty to disclose information arises if there is a relationship of trust and confidence between parties to the transaction. Chiarella had no such duty. He was not a corporate insider in the acquiring corporation and he did not receive confidential information from the target company. He also had no fiduciary relationship with the shareholders of the target company: he was not their agent; they placed no trust or confidence in him; indeed, they had no prior dealings with him. A duty to disclose under Section 10(b) does not arise from the mere possession of nonpublic market information.

Clarke v. Securities Industry Assn.

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Daily Income Fund, Inc. v. Fox

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Dirks v. Securities and Exchange Commission (SEC)

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Dunn v. Commodity Futures Trading Commission

Does the Commodity Futures Trading Commission have the authority to regulate "off exchange" trading in options to buy or sell foreign currency?

No. In an opinion authored by Justice John Paul Stevens, The Court ruled that the "Treasury Amendment" of the Commodity Exchange Act exempts from the Commodity Futures Trading Commission regulation off exchange trading in foreign currency options. "The arguments favoring each side in the important public policy dispute over whether off exchange foreign currency options should be exempt from CEA regulation are best addressed to the Congress, not the Courts," wrote Justice Stevens.

Dura Pharmaceuticals, Inc. v. Broudo

To prove "loss causation" in a securities fraud case, is it sufficient to show that the price of the security on the date of purchase was inflated because of misrepresentation?

No. In a unanimous opinion delivered by Justice Stephen Breyer, the Court held that an inflated purchase price did not by itself prove "loss causation." At most, an inflated purchase price suggested that misrepresentation "touched upon" a later economic loss, but did not necessarily cause it. The Court reasoned that at the moment the transaction took place, the plaintiff had not suffered a loss because the inflated purchase price was offset by ownership of a share that possessed equivalent value at that instant. Further, the logical link between the inflated purchase price and any later economic loss was not invariably strong, because other factors may have affected the price.

Ernst & Ernst v. Hochfelder

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F. T. C. v. Travelers Health Assn.

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Foremost-Mckesson v. Provident Securities

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Gould v. Ruefenacht

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Gustafson v. Alloyd Co., Inc., Fka Alloyd Holdings, Inc.

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Herman & Maclean v. Huddleston

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J. I. Case Co. v. Borak

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Kamen v. Kemper Financial Services, Inc.

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Kern County Land Co. v. Occidental Corp.

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Lampf v. Gilbertson

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Landreth Timber Co. v. Landreth

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Marine Bank v. Weaver

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Merrill Lynch, Pierce, Fenner & Smith v. Ware

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Musick, Peeler & Garrett v. Employers Insurance Of Wausau

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Pinter v. Dahl

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Piper v. Chris-Craft Industries

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Randall v. Loftsgaarden

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Reliance Electric Co. v. Emerson Electric Co.

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Reves v. Ernst & Young

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Rodriguez De Quijas v. Shearson/Am. Exp.

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Rondeau v. Mosinee Paper Corp.

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S. E. C. v. Capital Gains Bureau

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S. E. C. v. Variable Annuity Co.

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Santa Fe Industries, Inc. v. Green

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SEC v. Edwards

Does the Securities Exchange Act's (1934) term "investment contract" include an investment scheme in which the promoter promises a fixed return or the investor is entitled to a particular rate of return?

Yes. In a unanimous opinion delivered by Justice Sandra Day O'Connor, the Court held that an investment scheme promising a fixed rate of return can be an "investment contract" and thus a "security" subject to federal securities laws. The test the Court uses for determining whether a scheme is an "investment contract" is "whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others." Because the test does not distinguish between promises of fixed returns and promises of variable returns, the scheme at issue here can be defined as an "investment contract."

SEC v. National Securities, Inc.

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SEC v. O'Brien

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SEC v. Sloan

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SEC v. United Benefit Life Ins. Co.

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SEC v. Zandford

Is the alleged fraudulent conduct of a securities broker, who sells his customer's securities and using the proceeds for his own benefit without the customer's knowledge or consent, in connection with the purchase or sale of any security within the meaning of the Securities Exchange Act of 1934 and SEC Rule 10b-5?

Yes. In a unanimous opinion delivered by Justice John Paul Stevens, the Court held that assuming that the complaint's allegations were true, the securities broker's conduct was in connection with the purchase or sale of any security. Noting that Zandford's practices were not independent events, the Court found that each sale was made to further his fraudulent scheme and that each was deceptive because it was neither authorized by, nor disclosed to, the Woods. Therefore, Justice Stevens concluded, the stockbroker's breaches of fiduciary duty were in connection with the securities sales, within the meaning of the Securities Exchange Act of 1934, because the securities transactions and breaches of fiduciary duty coincided.

Securities Industry Assn. v. Board Of Governors

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Securities Industry Assn. v. Board Of Governors

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Securities Investor Protection v. Barbour

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Steadman v. SEC

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Supt. Of Insurance v. Bankers Life & Cas. Co.

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Tcherepnin v. Knight

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Teamsters v. Daniel

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Touche Ross & Co. v. Redington

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Transamerica Mortgage Advisors, Inc. v. Lewis

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Tsc Industries, Inc. v. Northway, Inc.

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United Housing Foundation, Inc. v. Forman

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United States v. Naftalin

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United States v. O'hagan

1) Does a security-trader violate the Securities and Exchange Act of 1934 by trading securities on the basis of misappropriated information pertaining to a company other than his own?

2) Did the Security Exchange Commission have the authority to make Rule 14e-3(a), which forbids security trading on nonpublic foreknowledge of a tender offer?

Yes and Yes. Justice Ruth Bader Ginsburg authored the opinion in the Court's 6-3 decision. The Court ruled that a security-trader who fails to disclose personal profits gained from reliance on exclusive information is guilty of employing "a deceptive device...in connection with the purchase of a security." The security-trader knowingly abuses the duty owed toward the source of information, whether the source is the company he works for or not.

The Court also held that the SEC has authority to "define and prescribe means reasonably designed to prevent fraudulent...acts...in connection with any tender offer." Rule 14e-3(a) of the Exchange Act, adopted under this fraud-prevention authority, forbids security-traders from trading on the basis of information they know should be kept private unless they publicly disclose their trades.

Virginia Bankshares, Inc. v. Sandberg

First, can a proxy statement couched in conclusory or qualitative terms, such as "high value," purporting to explain the directors' reasons for recommending a corporate action, be materially misleading within the meaning of Rule 14a-9? Second, can causation of damages compensable under Section 14(a) of the Securities Exchange Act of 1934, 15 U.S.C. Section 78n(a), be shown by members of a class of minority shareholders whose votes are not required by law or corporate bylaw to authorize the corporate action subject to the proxy solicitation?

Yes and no, respectively. Terms like "high value," in a commercial context, are reasonably understood to rest on a factual basis, and so could be shown to be misleading by garden-variety evidence. Furthermore, they can be materially misleading even if other information is available in the statement upon which an expert could deduce that they are false. A proxy statement should inform, not challenge the reader's critical wits. However, the link between the statement and the merger process is too speculative and too procedurally intractable to find an implied private right of action in cases in which the minority shareholders' votes are not required by law or corporate bylaw, and where the plaintiff's theory is that the vote was cosmetic.

Wharf Holdings Ltd. v. United International Holdings

Does an oral agreement to grant an option to buy stock, while secretly intending not to honor the option, violate the Securities Exchange Act of 1934?

Yes. In a unanimous opinion delivered by Justice Stephen G. Breyer, the Court held that an oral agreement to give an option to buy stock while secretly intending never to honor that option violates the Securities Exchange Act of 1934's prohibition of deceptive devices. Justice Breyer wrote for the Court that there was no "convincing reason to interpret the Act to exclude oral contracts as a class. The Act itself says that it applies to 'any contract' for the purchase or sale of a security."

Wilko v. Swan

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