Source: law/15usc78j.law
# 15 U.S.C. § 78j — Wave 2 law catalogue # Statutory text is pinned to the read-only IR record; doctrinal elements are annotations. law 15usc78j cite 15 U.S.C. § 78j title Manipulative and deceptive devices; Rule 10b-5 url https://www.neochart.com/catalog/federal/title_15/section_78j/title15_sec78j_0d32bcdde2f4/78j_manipulative_and_deceptive_devices_0001/index.html address catalog/federal/title_15/section_78j/title15_sec78j_0d32bcdde2f4/78j_manipulative_and_deceptive_devices_0001/index.html source ir/usc/title15.jsonl#title15_sec78j sha1=68c07500bf3ebc5bf4f964aba72f2f668d3d5283 chars=6978 claim private-misstatement : commerce & rule10b5 & statement & materiality & scienter & transaction & purchaser-seller & reliance & economic-loss & loss-causation gloss Ordinary private investor damages action under section 10(b)/Rule 10b-5(b); plaintiff must be a purchaser or seller. The implied private remedy requires reliance, actual economic loss and loss causation. Pleading requirements are separate from merits proof. This does not purport to catalogue every insider-trading, tippee, manipulation, or private scheme-liability variant. claim sec-core-fraud : commerce & rule10b5 & (statement | scheme) & materiality & scienter & transaction gloss Core SEC section 10(b)/Rule 10b-5 fraud violation, proved by a preponderance of the evidence. Private investor reliance and loss elements are not imported; requirements for a particular injunction, penalty, or disgorgement remedy remain separate. claim criminal-core-fraud : commerce & rule10b5 & (statement | scheme) & materiality & scienter & transaction & willfulness gloss Criminal section 10(b)/Rule 10b-5 offense via 15 U.S.C. §78ff(a); each charged element must be proved beyond a reasonable doubt. Do not substitute civil recklessness/pleading sufficiency for the required criminal mental state. Section 78ff(a)'s rule-knowledge imprisonment proviso is a cross-reference, not encoded as an acquittal defense. element commerce : and name Statutory commerce, mails, or exchange facility text @104..241 | by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange gloss Shared introductory jurisdictional hook; distinct from the transaction connection and from territorial reach of section 10(b). Territorial limits require separate analysis and are not resolved by incidental use of U.S. communications. element rule10b5 : and name Section 78j(b) rulemaking hook text @959..1037 | in contravention of such rules and regulations as the Commission may prescribe gloss This quote is deliberately the clause in subsection (b), after the deceptive-device language; it is not the repeated clause governing short sales in (a) or securities lending in (c). The IR strips subsection labels; context and offset identify (b). Rule 10b-5 is a separate regulation, not a quotation from statutory text. xref 17 C.F.R. § 240.10b-5(a)-(c) | Implementing regulation: fraudulent devices/schemes; untrue material statements or misleading half-truths; fraudulent acts/practices/courses of business. element statement : and name Materially false statement or misleading half-truth text @907..958 | any manipulative or deceptive device or contrivance rule /f3d/934/1307-01 @14508..14664 | Rather, absent a duty, material information needn't be disclosed unless its omission would render misleading other information that an issuer has disclosed. rule /us/564/0135-01 @7684..7865 | For purposes of Rule 10b-5, the maker of a statement is the person or entity with ultimate authority over the statement, including its content and whether and how to communicate it. gloss Under Janus, the Rule 10b-5(b) maker must have ultimate authority over content and whether/how to communicate the statement; drafting assistance alone is insufficient. Rule 10b-5(b) requires a false statement or omission that makes statements actually made misleading. Macquarie (2024) excludes pure omissions even when Item 303 requires disclosure. Do not turn every duty to disclose into a 10b-5(b) private claim; older broad omission phrasing in the cited 2019 opinions is bounded by that holding. xref 17 C.F.R. § 240.10b-5(b) | Statement/half-truth branch; statement attribution must be analyzed separately for each defendant. variant untrue-statement | False representation of material fact in its circumstances. variant half-truth | Statement rendered misleading by omitted qualifying information. element scheme : and name Fraudulent scheme or deceptive course of business text @907..958 | any manipulative or deceptive device or contrivance rule /f3d/933/1248-01 @17408..17565 | The Court expressly held that a person could incur liability under these provisions when the conduct involves another person's false or misleading statement. rule /f3d/929/0063-01 @5947..6197 | Under Chestman , "a person violates [ 17 C.F.R. § 240.10b-5 ] when he misappropriates material nonpublic information in breach of a fiduciary duty or similar relationship of trust and confidence and uses that information in a securities transaction." gloss Rule 10b-5(a)/(c) can reach a person who is not the maker of a statement; Lorenzo as applied in Malouf is an SEC scheme-liability holding. It does not create private aiding-and-abetting liability or dispense with the private plaintiff's separate reliance requirement. Insider misappropriation requires a duty/trust relationship and deceptive use of material nonpublic information, not possession alone. xref 17 C.F.R. § 240.10b-5(a), (c) | Device/scheme/artifice and fraudulent act/practice/course branches. variant knowing-dissemination | Lorenzo permits liability under (a)/(c) for knowing dissemination despite lack of maker status under (b). variant insider-misappropriation | Afriyie addresses duty-based misuse of confidential transaction information; full tipper/tippee catalogue is outside scope. element materiality : and name Importance to a reasonable investor text @907..958 | any manipulative or deceptive device or contrivance rule /f3d/935/0721-01 @34055..34300 | Generally, an omission is material "if there is 'a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the "total mix" of information made available.' " gloss Materiality is an objective total-mix inquiry, distinct from whether a particular plaintiff actually relied. Hui Feng involved deliberately undisclosed commissions; its investor-focused materiality analysis is used here without importing an unrestricted pure-omission theory after Macquarie. element scienter : and name Intent to deceive, manipulate, or defraud text @907..958 | any manipulative or deceptive device or contrivance rule /f3d/933/1248-01 @20022..20199 | In addressing these provisions, Mr. Malouf challenges the sufficiency of the evidence on scienter, which is "a mental state embracing intent to deceive, manipulate, or defraud." rule /f3d/933/1248-01 @20368..20419 | This mental state can include extreme recklessness. rule /f3d/935/0721-01 @30219..30383 | Although there are differences in the state of mind requirements for Rule 10b-5(b) and Section 17(a)(2), a showing of intentional or knowing conduct satisfies both. gloss Judge-made mental-state requirement; civil circuit formulations include sufficiently severe/extreme recklessness, not ordinary negligence. SEC scienter under Rule 10b-5 must not be diluted by the different negligence standards for Securities Act §17(a)(2)/(3). Strong-inference PSLRA pleading is not an extra merits element. xref 15 U.S.C. § 78u-4(b)(2)(A) | Private damages pleading requires particular facts supporting a strong inference of the required state of mind. element transaction : or name Connection with a covered securities or swap transaction text @672..806 | in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered text @808..846 | or any securities-based swap agreement rule /us/544/0336-01 @5661..5759 | (3) a connection with the purchase or sale of a security, see Blue Chip Stamps, supra, at 730-731; gloss Statutory transaction connection is shared across postures and includes the alternative security-based-swap-agreement branch. Purchaser/seller standing is a separate private-only requirement, not the meaning of this nexus. The source's subsection (b) says securities-based, while its concluding extension says security-based; both spellings are preserved. xref 15 U.S.C. § 78c(a)(10) | Cross-sectional definition of security; investment-contract questions require their own test. xref 15 U.S.C. § 78c(a)(78) | Cross-sectional definition of security-based swap agreement; do not equate this category with every swap or with every security-based swap. element transaction.security : or name Exchange-registered or unregistered security text @715..806 | any security registered on a national securities exchange or any security not so registered gloss Either securities alternative satisfies the instrument branch; the purchase-or-sale connection remains required. element transaction.swap : or name Securities-based swap agreement and statutory extension text @808..846 | or any securities-based swap agreement text @1906..2412 | Rules promulgated under subsection (b) that prohibit fraud, manipulation, or insider trading (but not rules imposing or specifying reporting or recordkeeping requirements, procedures, or standards as prophylactic measures against fraud, manipulation, or insider trading), and judicial precedents decided under subsection (b) and rules promulgated thereunder that prohibit fraud, manipulation, or insider trading, shall apply to security-based swap agreements to the same extent as they apply to securities. text @2413..2717 | Judicial precedents decided under section 77q(a) of this title and sections 78i, 78 o , 78p, 78t, and 78u–1 of this title, and judicial precedents decided under applicable rules promulgated under such sections, shall apply to security-based swap agreements to the same extent as they apply to securities. gloss This statutory alternative is included in each core claim through transaction. The concluding provision extends fraud/manipulation/insider-trading rules and precedents to these agreements; its express exclusion of prophylactic reporting/recordkeeping rules limits that extension. It is not an exemption from fraud liability. The second sentence identifies additional precedents extended to these agreements, without creating claims under those other sections here. element purchaser-seller : and name Private plaintiff's purchaser or seller status text @672..711 | in connection with the purchase or sale rule /us/547/0071-01 @9526..9785 | By the time this Court first confronted the question, literally hundreds of lower court decisions had accepted “Birnbaum’s conclusion that the plaintiff class for purposes of § 10(b) and Rule 10b-5 private damage actions is limited to purchasers and sellers.” rule /us/547/0071-01 @17007..17178 | The Blue Chip Stamps Court purported to define the scope of a private right of action under Rule 10b-5 — not to define the words “in connection with the purchase or sale.” rule /us/547/0071-01 @11717..11826 | The limitation of course had no application in Government enforcement actions brought pursuant to Rule 10b-5. gloss Judge-made Blue Chip limitation on the implied private damages remedy. Dabit, 547 U.S. 71, 80–81, 84 (2006), explains and applies the distinction in deciding SLUSA preclusion; its broader preclusion rule does not expand the private federal remedy. A holder or disappointed offeree cannot qualify merely because fraud coincides with someone else's transaction. Contracts to buy or sell count under the statutory definitions; an unaccepted offer alone does not. Government claims do not require this element. The statutory swap extension applies precedents to covered agreements to the same extent. xref 15 U.S.C. § 78c(a)(13)–(14) | Purchase and sale definitions include contracts to buy or sell; Blue Chip, 421 U.S. 723, 750–751, distinguishes contractual rights/duties from mere offeree status. element reliance : and name Private investor transaction causation text @907..958 | any manipulative or deceptive device or contrivance rule /f3d/927/0177-01 @17833..17960 | Federal law similarly requires that an investor "justifiably relied" on particular misstatements in an action under Rule 10b-5. rule /us/544/0336-01 @5760..6153 | (4) reliance, often referred to in cases involving public securities markets (fraud-on-the-market cases) as “transaction causation,” see Basic, supra, at 248-249 (nonconclusively presuming that the price of a publicly traded share reflects a material misrepresentation and that plaintiffs have relied upon that misrepresentation as long as they would not have bought the share in its absence); gloss Private plaintiff must connect the deceptive statement to the investment decision, subject to applicable rebuttable presumptions. Xia Bi addresses direct reliance in EB-5 investments; do not universalize that factual route into a rule excluding fraud-on-the-market reliance. variant direct | Investor connects an identified false statement to the purchase or sale. variant fraud-on-market | Rebuttable Basic presumption for an appropriate public-market case; prerequisites and price-impact rebuttal must be separately shown. element economic-loss : and name Actual economic loss in private damages action text @907..958 | any manipulative or deceptive device or contrivance rule /us/544/0336-01 @6860..7034 | Normally, in cases such as this one (i. e., fraud-on-the-market cases), an inflated purchase price will not itself constitute or proximately cause the relevant economic loss. gloss The private remedy requires economic loss, unlike the core SEC violation. Mere payment of an inflated purchase price does not itself establish the loss identified in Dura. xref 15 U.S.C. § 78u-4(b)(4) | Private plaintiff bears burden of proving the act or omission caused the loss for which damages are sought. element loss-causation : and name Causal connection between fraud and economic loss text @907..958 | any manipulative or deceptive device or contrivance rule /us/544/0336-01 @8927..9017 | To “touch upon” a loss is not to cause a loss, and it is the latter that the law requires. gloss Distinguish loss causation from reliance/transaction causation. Identify loss caused by the fraud rather than unrelated market or business developments; Dura does not require one particular form of corrective disclosure. xref 15 U.S.C. § 78u-4(b)(4) | Express statutory burden for loss causation supplements the implied private action. element willfulness : and name Additional criminal mental-state requirement text @907..958 | any manipulative or deceptive device or contrivance rule /f3d/929/0063-01 @9094..9480 | If the government proves beyond a reasonable doubt ... that the defendant engaged in an insider trading scheme, it must then prove that the defendant engaged in that scheme knowingly, willfully, and with intent to defraud MSD Capital .... It is for you to determine whether the government has established beyond a reasonable doubt such knowledge and intent on the part of the defendant. gloss Criminal prosecution derives its willfulness requirement from §78ff(a), not express wording in §78j(b). Afriyie approved knowing/willful/intent-to-defraud instructions in an insider-trading prosecution and held the government retained the beyond-reasonable-doubt burden. The precise instruction must fit the charged theory. xref 15 U.S.C. § 78ff(a) | Willful violations; separate proviso precludes imprisonment for a rule violation if the defendant proves lack of knowledge of the rule. constraint private-pleading(statement, scienter) : Pleading specificity and strong inference govern private complaint sufficiency rule /f3d/928/0151-01 @14995..15187 | "For an inference of scienter to be strong, 'a reasonable person would [have to] deem [it] cogent and at least as compelling as any opposing inference one could draw from the facts alleged.' " gloss Metzler applies PSLRA/Tellabs to dismiss insufficient scienter allegations even assuming statements plausibly misleading. Pleading is not proof at trial. constraint sec-private-distinction(materiality, reliance, economic-loss, loss-causation) : Private damages additions do not define the core SEC fraud violation rule /f-supp-3d/354/1330-01 @20442..20773 | But reasonable reliance "is not an element of an SEC enforcement action because Congress designated the SEC as the primary enforcer of the securities laws, and a private plaintiff's 'reliance' does not bear on the determination of whether the securities laws were violated, only whether that private plaintiff may recover damages." rule /f3d/362/1292-01 @8203..8379 | The SEC must prove violations of § 10(b) and § 14(e), and their supplementary Rules, by a preponderance of the evidence, and may use direct or circumstantial evidence to do so. gloss Conrad rejects importing a failed private reliance claim into SEC materiality analysis. Dura supplies the separate loss/loss-causation requirements for private damages; no remedy-specific SEC recovery standard is resolved here.