Investors rely upon statements of brokers, investment firms and the corporations themselves when deciding where they should invest their money. This information is often crucial in developing a successful long-term investment strategy. If there are problems with these disclosures, the companies are expected to resolve the issues as soon as possible.
Recently, the Supreme Court has decided to hear a case concerning a securities fraud class action lawsuit, and what a class of investors must do in order to be certified as a class. In this particular case, investors had relied upon statements made by Halliburton that occurred from June of 1999 to December of 2001. Investors purchased stock at a certain value, and then experienced losses when the stock price of the company began to fall.
The plaintiffs in this case alleged that Halliburton made three misrepresentations in these statements, which led to the decrease in value. This included understating its responsibility in asbestos-related payouts, projecting earnings based on some accounts that it would not ever receive and also overestimating the amount of money a prospective merger would make the company. The case has led to concerns that previous decisions concerning class certification in securities fraud matters may be substantially changed.
In a prior decision by the Supreme Court, Basic Inc. v. Levinson, the court allowed investors to bring suits based on a "fraud-upon-the-market" theory. This means that all of the information that is publically available can be relied upon to determine the company's stock price. Investors were not required to demonstrate that they relied upon any of the misleading statements, because this information was already being used when determining the value of the company's stock.
The Basic decision held that it would be impractical for each potential member of a class to have to show that they relied on the information provided before making a purchase of stock. This decision has led to many questions by lower courts about what plaintiffs must show and what defendants are allowed to do to rebut these presumptions before a class will be certified. Justices have sent signals that they may want to change the way these cases are handled at this stage in the process.
For investors, this case could lead to much more difficulty in being able to bring these types of lawsuits in the future. If you believe that you have been the victim of securities fraud, it is important that you speak with an attorney who has significant experience handling these kinds of cases.
Securities litigation is very complex, and you need to work with an attorney that understands how to investigation and present your claims. Companies will commit substantial resources to contesting your allegations, and it is essential that you have someone on your side, protecting your rights.