The Comparative Research on the Loss Causation of Securities Litigation

• Main Authors: Ju-erh LEE, 李如爾
• Other Authors: Yung-Cheng Chuang
• Format: Others
• Language: zh-TW
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/56417401848663672588

碩士 === 東吳大學 === 法律學系 === 99 === The Paragraph 1 and 3 of Article 20 of the Securities and Exchange Act of the Republic of the China (hereinafter “The Act”) are often referred as the “general anti-fraud rules” and are considered as, by most of scholars, imitation of the Section 10(b) of the American Securities Exchange Act (SEA) in 1934 and the Rule 10b-5 established by the U.S. Securities and Exchange Commission. Regarding the securities fraud litigations, from the viewpoints of investors, the main concern is to receive the actual compensations; therefore the certification and identification of causation requirements is the key point in the process of litigations. Because the Supreme Court has offered only limited guidance on securities causation issues, the lower federal courts have been left free to create, jurisdiction by jurisdiction, their common law. Courts eventually decided to use their own rubric to describe causation requirements in the securities sphere and, as a result, the terms “transaction” and “loss” causation emerged. Transaction causation is a requirement of cause-in-fact, and loss causation is analogous to the common-law principle of proximate cause. Notwithstanding the early ambiguity surrounding these terms, courts today uniformly require plaintiffs to prove both transaction and loss causation. The Supreme Courts had not established any judgment standard of loss causation until Dura Pharmaceuticals, Inc. v. Broudo litigation. the decision moved securities fraud jurisprudence toward an ex post loss rule that required an ex post decline in value, a more rigid proving standard, and away from the ex ante loss rule that allowed a plaintiff to recover for inflated share price at the time of transaction. Considering the measures of loss causation, there are two major issues involved: one is when the loss occurred and the other is the type of loss. Therefore, in the academic and judicial practices, people have proposed the “inflated purchase price approach”, the “price decline approach”, and the “investment risk increased approach” in order to identify the occurrence and form of losses and these three approaches will then affect the judgment standards of loss causation. In this thesis I would apply the “inflated purchase price approach” based on two reasons. First, this approach might deter fraud by forcing defendants to internalize the risks created by their representational misconduct. Secondly, it should adequately compensate injured plaintiffs and provide more incentives for plaintiffs to file private suits, so that limiting the costs of enforcing anti-fraud rules and encouraging investment can be achieved. Additionally, the importance to distinguish the conceptions between transaction and loss causation when reaching decisions and to apply the ex ante rules of price inflated approach when establishing the judgment standard of loss causation are suggested and are expected to be adopted in the judicial practices in Taiwan. This thesis is composed of seven chapters, as follows: The chapter I states the motivation, scope, and the structure of this thesis. The related literatures are reviewed here and the methodologies are also introduced. The chapter II discusses the theory and development of transaction and loss causation of securities frauds in the United States. I also present several different standards of loss causation judgments formed in the appeal courts before Dura decision in 2005. In the chapter III, the history of Dura litigation and the viewpoints held in the Supreme Court are presented. The chapter IV then focuses on exploring the securities fraud losses of plaintiffs on the market action in view of various propositions including the “inflated purchase price d approach”, the “price decline approach”, and the “investment risk increased approach”. Furthermore, the loss conceptions, based on above approaches, leading to different judgment standards of loss causation are analyzed as well as the corresponding criticisms. The chapter V primarily illustrates the frauds on the market action what constitute sufficient pleadings and proofs at trials, that defendant’s misstatement inflated the purchase price in a way that resulted in a loss to the plaintiff. In chapter VI, I present the academic theories and the judicial practices in Taiwan and comment on two decisions to produce the proposition of this thesis. The chapter VII summarizes the conclusions of this thesis.