Since the Supreme Court's decision in Affiliated Ute Citizens v. United States, l there has been considerable variation among the circuits regarding the requirement of reliance as an element of an action under rule 10b-5 of the federal securities regulations. The differences seem to stem from a disagreement as to the underlying purposes of the securities regulations. While the regulations were established to force disclosure of material investment information and to maintain market stability, they were also designed to protect the investing public. In an attempt to reconcile these sometimes disparate purposes, one circuit has designed a theory since labeled "fraud on the market." While it does not eliminate the reliance requirement of a 10b-5 action, this theory does substantially lessen the plaintiff's burden of proof. The reaction to this theory has led to further differences of opinion regarding exactly what the role of reliance should be, and the extent to which reliance must be proven to make out a prima facie case of securities fraud.
M. Lynn Haggerty,
Fraud on the Market: The Decline of Reliance in a 10b-5 Action, 12 Golden Gate U. L. Rev.