Warning

Info

Warning

Info

Warning

Info

LSDefine

Simple English definitions for legal terms

Rule 10b-5

Read a random definition: economic-realities test

A quick definition of Rule 10b-5:

Rule 10b-5 is a law made by the Securities and Exchange Commission (SEC) to stop people from lying or cheating when they buy or sell stocks. It says that it's illegal for anyone to trick or deceive others by lying about important information or leaving out important facts when they're buying or selling stocks. If someone breaks this law, they can be sued by people who were hurt by their lies or the SEC can punish them with criminal charges. To prove someone broke this law, the person suing or the SEC has to show that the liar knew they were lying and that the lies caused people to lose money.

A more thorough explanation:

Rule 10b-5 is a regulation created by the Securities and Exchange Commission (SEC) to prevent securities fraud. It prohibits anyone from using fraudulent schemes or making false statements in connection with the purchase or sale of any security.

The SEC created Rule 10b-5 under Section 10(b) of the Exchange Act, which gives the SEC the power to regulate securities fraud. The rule states that it is illegal for anyone to:

  • Use any device, scheme, or artifice to defraud
  • Make any untrue statement of a material fact or omit to state a material fact
  • Engage in any act, practice, or course of business that would operate as a fraud or deceit upon any person

Rule 10b-5 applies to both public offerings and private placements.

Courts have interpreted Rule 10b-5 to create a private civil cause of action, which means that individuals can sue for damages if they have been harmed by securities fraud. However, in order to have standing to bring a lawsuit under Rule 10b-5, the plaintiff must have actually purchased or sold a security. They cannot bring a lawsuit if they only claim that a fraudulent misrepresentation caused them to forego purchasing or selling a security.

To prove a violation of Rule 10b-5, a plaintiff or the SEC must prove the following elements:

  • The individual misrepresented a material fact
  • The individual did so knowingly (scienter)
  • The plaintiff relied on the individual's material misrepresentation
  • The plaintiff suffered a loss

If the SEC establishes these elements, the individual may be criminally liable.

Suppose a company's CEO knows that the company is about to go bankrupt but tells investors that the company is doing well and encourages them to buy stock. The CEO's statement is a material misrepresentation because it is false and would influence an investor's decision to buy stock. If an investor relies on the CEO's statement and buys stock, but later suffers a loss when the company goes bankrupt, they may have a cause of action under Rule 10b-5.

Rule | Rule 144A

Warning

Info

General

General chat about the legal profession.
main_chatroom
👍 Chat vibe: 0 👎
Help us make LSD better!
Tell us what's important to you
TGM
18:39
@texaslawhopefully: alas, haven’t even gotten an interview (applied around thanksgiving)
18:39
Yeah I would delay as long as you have plausible deniability
TGM
18:40
I actually do have a transcript issue that registrar needs to resolve, should I say that
TGM
18:41
(Course marked as Incomplete that’s supposed to be removed)
TGM
18:41
not sure if I should email them to say that, or just hold off on sending it and not give an excuse
18:41
I think I just wouldn’t reach out and if they ask for them then say that
Dkk
18:41
@tgm Yeah sounds good, say that if they ask
18:47
hey yall
18:47
im premed idk why im here
18:48
we’re like cool and sexy and fun I get it
18:48
true i love ur user
18:49
thank you my little crow friend
Dkk
18:50
Med law easy done
medicine is a scam
join the ethically ambiguous legal field instead
Dkk
18:57
I want to meet an attorney that defends clients who run into flat earth problems. I want an attorney that knows and believes in flat earth theory.
19:05
i want a flat earther for president. i want a guy who posts on 4chan for president. i want someone who mogs for president.
Dkk
19:18
Exactly. My version of that awful poem.
Dkk
19:19
I can accept a president with maybe one or two of the poems traits hut good God, all of them??? No ty.
windyMagician
19:20
president who respects sex is crazy
windyMagician
19:20
we had bill clinton already
Dkk
19:21
Bill Clinton, first and last black president
windyMagician
19:23
I want to go running but my leg feels weird
windyMagician
19:23
it doesn't hurt its just tingly
Dkk
19:26
It needs more alcohol. You tingle when your nerves need watering.
19:27
try stretching it maybe to see what's up
windyMagician
19:27
stretches make me think it's just soreness
windyMagician
19:27
I'm sober lol
Dkk
19:38
Anyone else get the google notification that your LSD password has been compromised lol. LSD got hacked.
LSD+ is ad-free, with DMs, discounts, case briefs & more.