What Is Rule 10b-5?
Rule 10b-5 is a federal securities regulation that prohibits fraud and deception in connection with the purchase or sale of securities. Adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, it is the principal anti-fraud rule of U.S. securities law and the basis for most securities-fraud and insider-trading cases.
What Rule 10b-5 Prohibits
- Employing any device, scheme, or artifice to defraud
- Making an untrue statement of material fact — or omitting a material fact that makes statements misleading
- Engaging in any act or practice that operates as a fraud or deceit on a buyer or seller of securities
How Claims Arise
Both the SEC and private investors can bring claims under Rule 10b-5. A private plaintiff generally must show a material misrepresentation or omission, made with intent (scienter), in connection with a securities transaction, on which the plaintiff relied, causing a loss. Insider trading — trading on material nonpublic information in breach of a duty — is also prosecuted under this rule. Because it is federal, Rule 10b-5 applies to securities transactions involving Florida investors and businesses alongside Florida's own securities laws.
Related Terms
- Title 15 U.S.C. — Where federal securities laws reside
- Malfeasance — Wrongful conduct of a related kind
- Damages — What a defrauded investor seeks
Barnes Walker
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Federal Law Reference
17 C.F.R. § 240.10b-5 (Securities Exchange Act § 10(b))
The SEC’s principal anti-fraud rule, prohibiting material misstatements, omissions, and deceptive practices in connection with the purchase or sale of any security.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC