'Materialization Of Risk' In Securities Class Actions: Part 2

By Dorothy Spenner, James Heyworth, Daniel McLaughlin and Ariel Atlas (June 7, 2017, 11:24 AM EDT) -- In part one of this two-part series, we discussed how plaintiffs asserting claims for securities fraud under Section 10(b) of the Securities and Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, increasingly invoke the "materialization of risk" theory of loss causation. This is particularly the case when plaintiffs cannot plead a clear "corrective disclosure" — i.e., a statement that reveals that some prior disclosure was false or misleading and, as a consequence, negatively affects the value of a security. The materialization of risk theory allows plaintiffs to instead allege that a risk that the defendants fraudulently concealed eventually came to...

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