The SEC Pleading Standard For Scienter

Law360, New York (September 10, 2009, 1:30 PM EDT) -- More than 30 years ago the U.S. Supreme Court held that a private litigant must sufficiently plead scienter to make out a claim under the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.[1] Allegations of negligence would not suffice.

The court reasoned that the plain language of Section 10(b), including terms like “manipulative,” “device” and “contrivance,” demonstrated a congressional intent to prohibit only “knowing or intentional misconduct.”[2]

The question remained, however, whether scienter was also a requirement...
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