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Second Circuit Review: Statutory Standing Under §10(b) And SEC Rule 10b-5

November 28, 2022

Litigation of counsel Martin Flumenbaum and firm Chairman Brad Karp’s latest Second Circuit Review column, “Statutory Standing Under §10(b) And SEC Rule 10b-5,” appeared in the November 23 issue of the New York Law Journal. The authors discuss a recent decision in Menora Mivtachim Insurance Ltd. v. Frutarom Industries Ltd. in which the court held that a putative class of investors in an acquiring company did not have statutory standing under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 to sue the acquirer’s target company based on alleged misstatements that the target made about itself before the merger. The panel found that under circuit precedent, investors cannot sue a company whose stock they did not purchase for misstatements the defendant company made about itself, articulating a new categorical application of the “purchaser-seller” rule, which determines who can be part of a class in a securities class action, and furthering a 70-year-long trend toward a narrower class of Rule 10b-5 plaintiffs. Litigation associate Hillary Black assisted in the preparation of this column.

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