How can a private plaintiff prove securities fraud?

Question: How can a private plaintiff prove securities fraud?

Response: To prevail on a private securities fraud claim involving sales in public securities markets or publicly-traded securities, securities law attorneys must prove the following elements:

(1) A material omission or misrepresentation;

(2) Knowledge of wrongdoing (referred to as 'scienter');

(3) A connection with the sale of purchase of a security;

(4) Reliance on a material misrepresentation concerning the cost of a publicly-traded share (also known as "transaction causation")

(5) Economic loss; and

(6) A direct connection between the loss and the material misrepresentation (known as 'loss causation').

To establish economic loss, it is not sufficient for plaintiffs to show an inflated purchase payment.  He or she must suffer a loss as a result of defendant's fraud.

Answered by Yara Zakharia

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