Frequently Asked Questions
The frequently asked questions section (FAQ) will attempt to answer
questions that are raised by articles appearing in each issue of The
Corporate Insider. The FAQ below addresses questions raised in our
first issue.
Q: What is fraud?
A: Fraud is the knowing misrepresentation or omission of a material
fact with the intention that a person or entity rely on the
misrepresentation or omission to his or her detriment.
Q: Is securities fraud different than regular fraud?
A: Yes. Securities fraud plaintiffs do not have to prove that they
relied on a particular misrepresentation or omission in purchasing
securities. Securities fraud is premised on the notion that the market
price of a particular security is an accurate reflection of all
publicly disseminated information. Thus, under what has become known
as the fraud on the market doctrine -- in contrast to regular fraud
cases -- securities plaintiffs do not have to prove reliance.
Q: What is consumer fraud?
A: Consumer fraud flows from knowing misrepresentations or material
omissions concerning a particular product. Consumer fraud cases are
frequently governed by state laws.
Q: How does an investor know when it has been defrauded?
A: Fraud is a wrong that involves concealment of the truth. Therefore,
an investor will not immediately know that it is being defrauded. At
some point, information will surface revealing information previously
concealed. Then, the investor may have information to make additional
inquiries and determine whether information was misrepresented or
intentionally withheld.
Q: What should pension fund trustees do about securities fraud?
A: A pension fund trustee has a duty to protect the assets of the fund
and to take whatever measures are reasonable to insure that the assets
of the fund are not being adversely affected by securities fraud. If
the pension fund has been victimized by securities fraud, its trustees
have a fiduciary duty to explore whether it serves the best interests
of that pension fund to serve as Lead Plaintiff in the class action
against the wrongdoer.
