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Pslra Case Summary

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Link to Quora Question: https://www.quora.com/search?q=What+are+the+%22safe+harbor+provisions+of+the+Private+Securities+Litigation+Reform+Act%22%3F The Private Securities Litigation Reform Act (PSLRA), enacted in 1995 by Congress, was borne for the need to present some oversight in “abusive practices committed in private securities litigation” which subsequently caused periodic lawsuits against securities issuers and their stock prices that had significant changes. Because of these “frivolous” Rule 10b-5 lawsuits, the PSLRA raised three provisions that plaintiffs would have to meet to launch complaints. False statements be pleaded "with particularity" 15 U.S.C. § 78u-4(b)(1). If a plaintiff's complaint does not specifically identify the allegedly fraudulent statements and explain why they were misleading, the complaint will be dismissed. This provision puts the burden of proof on the plaintiff, allowing defendants to respond to the complaint. The Rule 9(b) of the Federal Rules of Civil Procedure already required that allegations of fraud be pleaded with particularity. Plea creates a "strong inference" of scienter The PSLRA also requires a plaintiff to allege that the defendant acted with the required state of mind, i.e., that he knew …show more content…

The Supreme Court observed that an investor who purchases a stock at an artificially inflated price suffers no economic loss at the time of purchase. The loss occurs only when the truth is disclosed and the stock price falls as a result. Thus, a plaintiff who sells his shares "before the relevant truth begins to leak out" does not suffer any economic damage. The plaintiff in Dura failed to allege that the "share price fell significantly after the truth became known", and therefore the complaint had not alleged loss

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