Loos v. Immersion Corporation: Redefining the Standard in Loss Causation Arguments
In: California Law Review Circuit, Jg. 6 (2015-04-01), S. 18
Online
academicJournal
INTRODUCTION Companies typically conduct internal investigations under a veil of secrecy, withholding information about an investigation until federal or state disclosure requirements mandate disclosure. Company directors and officers fear that a premature admission of wrongdoing will negatively affect the firm's stock price and expose the firm to liability. Hence, a company has a strong incentive to defer any announcement until it is certain the internal investigation will uncover fraud. The Ninth Circuit's decision in Loos v. Immersion Corp. 1 changes this incentive encouraging companies to announce internal investigations earlier and limiting shareholders' ability to recover financial losses after such a disclosure. Specifically, in Loos , the Ninth Circuit held that the mere announcement of an internal investigation (preemptive announcement) alone is not enough to plead and prove loss causation --the causal link between a defendant's misrepresentation and a subsequent financial loss. Loss causation is an essential element of a securities fraud action under section 10(b) of the Securities Exchange Act of 1934 (Exchange Act). 2 The court also held that public disclosure of fraud, or corrective disclosure , is a necessary aspect of proving loss causation. In the same vein, the court affirmed that earnings releases announcing poor financial results are not sufficient in themselves to meet the loss causation requirement. Although the Loos court correctly maintained that a corrective disclosure is a necessary aspect of proving loss causation, it ultimately erred in not including an announcement of an investigation in ...
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Loos v. Immersion Corporation: Redefining the Standard in Loss Causation Arguments
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Autor/in / Beteiligte Person: | Martinez, Dennise |
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Zeitschrift: | California Law Review Circuit, Jg. 6 (2015-04-01), S. 18 |
Veröffentlichung: | 2015 |
Medientyp: | academicJournal |
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