Congress passed the Securities Act of 1933 and the Securities Exchange Act of 1934 (the "Acts") at the height of the Great Depression. Prior to the passage of the Securities Act, President Roosevelt stated: "This proposal adds to the ancient rule of caveat emptor the further doctrine, 'let the seller also beware.' It puts the burden of telling the whole truth on the seller." Similarly, prior to the Securities Act's passage, Senator Peter Norbeck (R-SD) urged for the passage of legislation that would "definitively fix responsibility for deception and frauds upon directors and other officials and with severe penalties for such acts." In the decades since the Acts' passage, "reform" legislation and court rulings have made it more and more difficult to successfully plead and prove a cause of action under the Acts. For example, U.S. investors cannot bring claims under the Acts to recover losses for alleged violations committed by companies whose stock trades on non-U.S. exchanges. Additionally, as this blog covered in an earlier post, depending on how the United States Supreme Court rules in Halliburton Co. v. Erica P. John Fund, Inc., investors may be foreclosed from a presumption of reliance based on the longstanding fraud-on-the-market theory. Recently, we wrote a paper outlining the "Evisceration of the Federal Securities Laws," which you can find by clicking here.
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