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Can anyone give me a definitive list of the elements (procedural requirements) that need to be met to bring a private right of action under 10b-5?

Fraud
Materiality (Basic v. Levinson/Probability-Magnitude)
In connection with purchase/sale of securities (TX Gulf Sulphur)
Causal nexus between fraud and resulting harm (reliance + causation)
Scienter

SEC 10b-5 – no false statements or omissions of material facts in a purchase or sale
Also scienter + reliance (except for omission) + causation + damages for private action

IIRC fraud's one of the things but not definitely required.
Also remember, that PRActions don't really every happen.

I think it works like this: the elements are fraud, in connection with the sale of securities. So some of the elements are just sub-elements of common law fraud. I'd probably organize it conceptually like this:

1. Fraud:
1a. Deceit or omission
1b. Duty to disclose/be truthful (more of an issue for omissions than outright lies)
1c. Scienter (Hochfelder; Tellabs for post-PSLRA)
1d. Materiality (Basic)
1e. Reliance (Basic for fraud on the market; Affiliated Ute for face-to-face)
1f. Loss Causation (Dura Pharmaceuticals)
1g. Damages
2. In Connection with (Texas Gulf Sulfur)
3. The sale of securities (Blue Chip Stamp)

JusticeHarlan wrote:I think it works like this: the elements are fraud, in connection with the sale of securities. So some of the elements are just sub-elements of common law fraud. I'd probably organize it conceptually like this:

1. Fraud:
1a. Deceit or omission
1b. Duty to disclose/be truthful (more of an issue for omissions than outright lies)
1c. Scienter (Hochfelder; Tellabs for post-PSLRA)
1d. Materiality (Basic)
1e. Reliance (Basic for fraud on the market; Affiliated Ute for face-to-face)
1f. Loss Causation (Dura Pharmaceuticals)
1g. Damages
2. In Connection with (Texas Gulf Sulfur)
3. The sale of securities (Blue Chip Stamp)

are you sure there's duty to disclose for 10b-5? Not saying you're wrong, but I know duty to disclose was removed as an element for a lot of those.

I read it as having two flavors:

(1) misstatement: requires some speech + material falsity

(2) omission: requires silence + duty to speak/disclose

JamMasterJ wrote:are you sure there's duty to disclose for 10b-5? Not saying you're wrong, but I know duty to disclose was removed as an element for a lot of those.

sambeber wrote:I read it as having two flavors:

(1) misstatement: requires some speech + material falsity

(2) omission: requires silence + duty to speak/disclose

Yeah, this: the duty comes in for omission-based claims. You don't have a general duty to shout every piece of bad news about the corporation from the rooftops because not saying something generally won't be a violation. But if it's something you have to disclose in a 10-Q (or, more interestingly, an 8-K) and you don't, then it may be a violation. (IIRC, it also comes into play when you speak truthfully and positively on a subject but don't mention the related negatives. Once you open your mouth on topic, you've essentially created the duty to full and fair disclosure so as to avoid a misleading impression. Also, there's a circuit split on whether you have to update info that was true when you said it but isn't anymore; 7th says no duty, 2nd says there is a duty, according to my old outline.)

For misstatements, there's not going to be a duty issue.

Think of it like negligence torts: you don't generally go into a discussion of duty for misfeasance (hitting someone with your car), only non-feasance (not pulling someone out of the way of a speeding car). Same idea for misstatements and omissions.

I think including "duty to disclose" as an element of a 10b-5 action is wrong and very confusing. 10b-5 itself is the duty.

"It is unlawful make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading"

The rule itself is a duty to make true statements - or non-misleading statements.

EDIT: I re-read your post and see what you're talking about now, still think you made it more confusing though. I have duty to update/correct as subcategories of fraud.

Mike12188 wrote:I think including "duty to disclose" as an element of a 10b-5 action is wrong and very confusing. 10b-5 itself is the duty.

"It is unlawful make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading"

The rule itself is a duty to make true statements - or non-misleading statements.

How do you deal with silence-based 10b-5 actions then?

Mike12188 wrote:The rule itself is a duty to make true statements

But when, and in what contexts, do you need to make true statements? Whenever anything important happens?

JH, you're right, I had tender offers in mind, which are under 14e-3

JusticeHarlan wrote:

Mike12188 wrote:The rule itself is a duty to make true statements

But when, and in what contexts, do you need to make true statements? Whenever anything important happens?

When you speak (unless of course its puffery) . I think there was a big misunderstanding on my part and I agree with you. I agree there is a duty to update, disclose - I just don't have them listed as separate elements, just that for example in the absence of a duty to update silence would not be fraudulent, so the first element of 10b-5 would not be met. Sorry for any confusion.

I'm not sure what all the situations are where a "duty to disclose" arises, but the Supreme Court has appealed to such a duty in the context of insider trading. For example, in Chiarella v. United States, the Court held that a corporate insider has a duty to disclose material nonpublic information to shareholders or refrain from trading on that information.