SMU Law Review
Securities law opinions during this period fall into two categories. The first deals with incompetent lawyers. In Miller, a state court reinstated a cease and desist order against an issuer whose lawyer failed to object to a witness's testimony when a co-defendant's counsel did. In In re Next Financial Group, the Texas Supreme Court granted mandamus and ordered arbitration for the termination of a broker when the arbitration agreement permitted only an exception for statutory discrimination, not a common law exception to the employment-at-will doctrine.
The second group of cases involve Fifth Circuit opinions discussing securities fraud actions under the Private Securities Litigation Reform Act (“PSLRA”). The primary focus was on “loss causation.” Continuing the drive to thwart securities fraud actions, the Fifth Circuit in Catogas, affirmed a dismissal and determined that for "loss causation," investors must show an immediate decline in the issuer's stock price following corrective disclosure. In Fener, the Fifth Circuit denied class certification, requiring that loss causation requires separating that portion of the loss stemming from the corrective disclosure from that portion of the loss caused by disclosure of other negative information. With respect to a strong inference of scienter, the Fifth Circuit in Flaherty & Crumrine Preferred Income Fund affirmed a dismissal, determining that vague cautionary statements and warnings defeat the strong inference. In contrast, the Fifth Circuit determined in Lormand that the pleading standard for loss causation is the short and simple pleading of Rule 8, not the particularity of Rule 9, and that serial disclosure does not defeat a finding of loss causation. In Alaska Electrical Pension Fund, the Fifth Circuit held that the disclosure need not be a fact-for-fact disclosure and that reflecting part of the truth obscured by the fraud is sufficient.
George Lee Flint, Jr., Texas Annual Survey: Securities Regulation, 63 S.M.U. L. Rev. 795 (2010).