# Securities fraud

`kaal:entity:securities-fraud`

**Status.** derived

This node is assembled mechanically from the 17 claims that carry the concept tag `securities-fraud`. It is a roster of what the corpus says under this term. It is **not** an adjudicated definition: no single statement here has been ruled canonical, and no first-appearance call has been made. Read the claims and judge for yourself.

## Every claim under this term

17 claims across 5 works, 2010 to 2016.

**2010**

- [1558614-030](https://wulfkaal.github.io/claims/1558614-030) [mechanism/argued] *(failure mode)* -- The more a country leads in financial innovation, the more exposed its disclosure regime is to misrepresentation and fraud, which makes the U.S. regime more vulnerable than Germany's despite being formally stricter.
  > to the extent financial innovation in the United States is ahead of that in Germany, the U.S. disclosure regime may be more vulnerable to misrepresentation and fraud
  Painter and Kaal, Initial Reflections on an Evolving Standard Constraints on Risk Taking by Directors and Officers in (2010). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1558614
- [1664809-004](https://wulfkaal.github.io/claims/1664809-004) [failure/argued] *(failure mode)* -- Allowing foreign plaintiffs to sue foreign defendants in US courts over securities purchased and sold in foreign countries would turn the United States into the global arbiter of securities fraud allegations.
  > United States into the global arbiter of securities fraud allegations,
  Richard W. Painter, Wulf A. Kaal, Extraterritorial Application of US Securities Law – Will the US Become the Default Jurisdiction for (2010). SSRN: https://ssrn.com/abstract=1664809
- [1664809-005](https://wulfkaal.github.io/claims/1664809-005) [normative/argued] -- Because many countries choose to combat securities fraud through government enforcement rather than private litigation, the United States should respect the right of other countries to regulate their own markets.
  > respect the right of other countries to regulate their own markets.
  Richard W. Painter, Wulf A. Kaal, Extraterritorial Application of US Securities Law – Will the US Become the Default Jurisdiction for (2010). SSRN: https://ssrn.com/abstract=1664809
- [1664809-019](https://wulfkaal.github.io/claims/1664809-019) [condition/argued] -- Under section 7216 US law could apply to EU companies accused of conduct violating US securities laws even if those companies have no securities traded in the United States.
  > conduct violating US securities laws, even if they have no securi-
  Richard W. Painter, Wulf A. Kaal, Extraterritorial Application of US Securities Law – Will the US Become the Default Jurisdiction for (2010). SSRN: https://ssrn.com/abstract=1664809
- [1664809-026](https://wulfkaal.github.io/claims/1664809-026) [mechanism/argued] -- Banks, brokers and other financial intermediaries figure in a large proportion of US securities fraud cases because they often have the deep pockets that plaintiffs' lawyers are looking for.
  > often have the 'deep pockets' that plaintiffs' lawyers are looking
  Richard W. Painter, Wulf A. Kaal, Extraterritorial Application of US Securities Law – Will the US Become the Default Jurisdiction for (2010). SSRN: https://ssrn.com/abstract=1664809
- [1664809-027](https://wulfkaal.github.io/claims/1664809-027) [predictive/argued] -- If section 7216 extends US securities fraud provisions to non-US securities transactions, European financial intermediaries could become the dominant target for plaintiffs' attorneys.
  > intermediaries could become the dominant target for plaintiff's
  Richard W. Painter, Wulf A. Kaal, Extraterritorial Application of US Securities Law – Will the US Become the Default Jurisdiction for (2010). SSRN: https://ssrn.com/abstract=1664809
- [1664809-031](https://wulfkaal.github.io/claims/1664809-031) [normative/argued] -- Regardless of the relative merits of securities regulation in the United States and Europe, European investors are most likely to benefit if Europe addresses the problem of investor protection itself rather than through US courts.
  > European investors are most likely to benefit if Europe addresses
  Richard W. Painter, Wulf A. Kaal, Extraterritorial Application of US Securities Law – Will the US Become the Default Jurisdiction for (2010). SSRN: https://ssrn.com/abstract=1664809
- [1664809-036](https://wulfkaal.github.io/claims/1664809-036) [design/argued] *(failure mode)* -- Exporting and imposing rules through extraterritorial reach could be counterproductive not only for US diplomacy but also for international cooperation in combating securities fraud, whereas cooperative mutual adjustment between the US and the EU is the better course.
  > Exporting and imposing rules through extraterritorial reach, on the other hand, could be counterproductive not only for US diplomacy but also for international cooperation in combating
  Richard W. Painter, Wulf A. Kaal, Extraterritorial Application of US Securities Law – Will the US Become the Default Jurisdiction for (2010). SSRN: https://ssrn.com/abstract=1664809
- [1664809-037](https://wulfkaal.github.io/claims/1664809-037) [mechanism/argued] -- If national securities regulators are unable or unwilling to cooperate with each other, there is likely to be more securities fraud.
  > If national securities regulators are unable or unwilling to cooperate with each other, there is likely to be more
  Richard W. Painter, Wulf A. Kaal, Extraterritorial Application of US Securities Law – Will the US Become the Default Jurisdiction for (2010). SSRN: https://ssrn.com/abstract=1664809

**2011**

- [1765901-001](https://wulfkaal.github.io/claims/1765901-001) [mechanism/argued] -- Because Morrison ties Section 10(b) to the location of the securities transaction rather than to the place where the deception originated, the logic of the holding implies that the SEC likewise has no enforcement rights over securities transactions occurring outside the United States.
  > The logic of the holding strongly suggests that there would also be no enforcement rights for the SEC with respect to securities transactions taking place outside the United States
  Kaal and Painter, The Aftermath of Morrison v. National Australia Bank and Elliott Associates v. Porsche (2011). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1765901
- [1765901-033](https://wulfkaal.github.io/claims/1765901-033) [normative/argued] -- Changing national rules in a spirit of cooperation among states and regulators is more productive for preventing securities fraud than imposing U.S. rules on foreign nations through extraterritorial imperialism.
  > Cooperation among nation states and their regulators to prevent securities fraud could help improve foreign relations. Changing national rules in the spirit of cooperation is likely to be more productive than imposing rules on foreign nations through extraterritorial imperialism.
  Kaal and Painter, The Aftermath of Morrison v. National Australia Bank and Elliott Associates v. Porsche (2011). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1765901

**2012**

- [2029983-040](https://wulfkaal.github.io/claims/2029983-040) [normative/argued] -- Although many jurisdictions may protect investors less well than the United States, it is not at all certain that U.S. law does a better job of deterring securities fraud.
  > While many jurisdictions could be worse than the United States at protecting investors, it is not at all certain that U.S. law does a better job of deterring securities fraud.
  Wulf A. Kaal, Richard W. Painter, Forum Competition and Choice of Law Competition in Securities Law after Morrison v. National Austral (2012). SSRN: https://ssrn.com/abstract=2029983

**2016**

- [2811718-017](https://wulfkaal.github.io/claims/2811718-017) [empirical/evidenced] -- While some courts found that a complete lack of investor due diligence can amount to securities fraud or breach of contract, and that lacking due diligence can breach fiduciary duties, the majority of courts evaluate private fund due diligence issues in the context of misrepresentation.
  > IDD can be a breach of fiduciary duties,84 the majority of courts evaluate issues pertaining to private fund IDD in the context of misrepresentation.
  Wulf A. Kaal, Private Fund Investor Due Diligence – Evidence from 1995 to 2015 (2016). SSRN: https://ssrn.com/abstract=2811718
- [2811718-020](https://wulfkaal.github.io/claims/2811718-020) [failure/evidenced] *(failure mode)* -- Deficient due diligence does not create securities fraud liability unless it is intentional or highly reckless; conduct that is merely negligent or professionally incompetent falls short of the scienter requirement.
  > Courts hold that the lack of due diligence, beyond merely being negligent or just professionally incompetent, must be intentional or highly reckless.
  Wulf A. Kaal, Private Fund Investor Due Diligence – Evidence from 1995 to 2015 (2016). SSRN: https://ssrn.com/abstract=2811718
- [2811718-021](https://wulfkaal.github.io/claims/2811718-021) [failure/evidenced] *(failure mode)* -- Failing to check publicly available documentation on an investment is irresponsible but insufficient to plead fraudulent intent, and failing to perform due diligence commensurate with industry standards is inadequate to plead scienter.
  > While irresponsible, the lack of checking public documentation on an investment is insufficient to plead fraudulent intent,102 and "[failing] to perform due diligence commensurate with industry standards is inadequate to plead scienter.
  Wulf A. Kaal, Private Fund Investor Due Diligence – Evidence from 1995 to 2015 (2016). SSRN: https://ssrn.com/abstract=2811718
- [2811718-029](https://wulfkaal.github.io/claims/2811718-029) [failure/evidenced] *(failure mode)* -- Claims in which investors use hindsight to second guess due diligence practices often fail, even when the manager was clearly incompetent.
  > Claims that involve investors using hindsight to second guess the due diligence practice often fail (even in the face of clearly incompetent management), as seen in South Cherry Street,
  Wulf A. Kaal, Private Fund Investor Due Diligence – Evidence from 1995 to 2015 (2016). SSRN: https://ssrn.com/abstract=2811718
- [2811718-030](https://wulfkaal.github.io/claims/2811718-030) [condition/evidenced] -- Funds that promise due diligence with no intention of actually carrying it out violate federal securities laws rather than merely breaching a contract.
  > but it has been held that funds that promise due diligence and yet have no intention of actually carrying it out are violating federal securities laws rather than breaching basic contracts.
  Wulf A. Kaal, Private Fund Investor Due Diligence – Evidence from 1995 to 2015 (2016). SSRN: https://ssrn.com/abstract=2811718

## Verify

Every claim above resolves to a record carrying a verbatim source quote, the sha256 of the source PDF, and a preformatted citation. Nothing here asks to be taken on trust.

    curl -s https://wulfkaal.github.io/entities/securities-fraud.md | sha256sum

**Canonical form.** This markdown file is the canonical hashed representation of this entity node. Its sha256 is the content hash.