During the 1970’s and 1980’s, the United States Supreme Court decided a number of cases in which the Justices wrestled with the elements and scope of Rule 10b-5, promulgated by the Securities and Exchange Commission under Section 10(b) of the Securities Exchange Act of 1934. Some of these cases were civil – private parties suing other parties for alleged violations of the rule, others were administrative enforcement actions brought by the SEC itself, and a few were criminal cases. Despite the different character of the cases, one could discern certain competing themes, or currents, espoused by different justices in these cases. These currents included: idealism (espousing the view that all investors should have equal access to information); traditionalism (viewing corporate law as largely state law and shunning further federalization of that body of law); economic behaviorism (viewing the scope of rule 10b-5 in terms of the behavior of parties outside the litigation, most especially from the viewpoint of incentives necessary to produce information); paradigm case analysis (identifying the primary focus of securities legislation and determining whether the application of rule 10b-5 in a given case was proximate or distant from that focus); literalism (analyzing whether rule 10b-5 was violated in terms of the literal meaning of certain words, most particularly the term, “security”); and textual structuralism (interpreting the rule to make it congruent with securities legislation and regulations as a whole, particularly the ’34 Act). The article identifies those Justices whose opinions reflected one or more of these competing currents.
SEC, Securities and Exchange Commission, United States Supreme Court, Securities Exchange Act of 1934, idealism, traditionalism, economic behaviorism, rule 10b-5
Securities, Law and economics, Jurisprudence
Indiana University Robert H. McKinney School of Law
Indiana Law Review, Vol. 21, No. 3, pp. 625-667, 1988.