U.S. Supreme Court to Hear Challenge to Fraud-on-the-Market Presumption

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On June 11, 2012, the U.S. Supreme Court granted certiorari to a biotechnology company's challenge of the fraud-on-the-market presumption in a securities fraud case. This rebuttable presumption was first approved by the Court in 1988, when it held that all public information in an efficient market is reflected in the market price of a security, and therefore, an investor who purchases or sells stock at the market price has relied upon all public statements. Since then, it has been an important tool for securities class action plaintiffs in obtaining class certification.