Document Type

Article

Publication Date

2013

Abstract

This Article proposes a new analytical framework to apply to statements of opinion in securities fraud cases. Although statements of opinion form the basis of some of the most cutting edge securities fraud claims-such as those asserted against securities analysts and credit rating agencies-statements of opinion do not fit squarely within the elements of securities fraud. In particular, three issues arise: (1) When is a statement of opinion false so as to qualify as a misrepresentation? (2) When is a statement of opinion material? (3) And, for that matter, what is the distinction between a statement of fact and a statement of opinion? Courts confronting these issues apply various analytically unsound and inconsistent tests. In response, this Article proposes a novel approach, drawing on the policy rationales underlying securities fraud claims, case law and scholarly commentary addressing how to apply the elements of securities fraud to statements of opinion, and comparable analyses in the contexts of common law fraud and defamation. First, this Article argues that statements of opinion are only false if both objectively unreasonable and subjectively disbelieved. Second, this Article proposes the following new evaluation-inference test to differentiate statements of opinion from statements of fact: Does the statement express the speaker's evaluation or inference of facts? Finally, this Article proposes the following new reasonable implication test to distinguish opinions that are immaterial as a matter of law from those that are potentially material: Does the opinion reasonably imply an allegedly false, material fact?

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