Plaintiffs commonly bring two distinct types of claims under Section 1(b) of the Securities Exchange Act of 1934: 1) claims of material misrepresentations or omissions; and 2) claims of trade-based market manipulation. Despite the distinctive features of the two types of claims, courts have tended to treat them identically when applying the “fraud on the market” doctrine. In particular, courts have required both types of plaintiffs to make identical showings that the relevant security traded in an “efficient market” in order to gain a presumption of reliance. The reasons for requiring such a showing by plaintiffs in a misrepresentation case are, however, inapplicable in market manipulation cases. Plaintiffs alleging market manipulation should not be required to demonstrate an efficient market in order to benefit from the fraud on the market doctrine’s presumption of reliance. If plaintiffs are made to make any showing at all, it should be a showing of loss causation.


Securities Regulation, Securities Litigation, Fraud on the Market, Market Manipulation

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Place of Original Publication

William and Mary Law Review

Publication Information

52 William & Mary Law Review 1111 (2011)


COinS Charles R. Korsmo Faculty Bio