The fraud-on-the-market tort

It is commonplace to observe that there are differences between private 10b-5 actions and common-law actions for deceit, notwithstanding that both travel under the name of "fraud." It is equally commonplace to suppose that these differences primarily reflect the need to adapt law that was first developed in a world of face-to-face transactions to the modern reality of large-scale, impersonal markets. The poster children for the transition from common-law fraud to securities fraud are, first, the Supreme Court's adoption in Basic Inc v. Levinson of the fraud-on-the-market doctrine and, second, the related emergence of securities fraud class actions. Deceit is quite obviously applicable to impersonal interactions, as the authors point out in Part II. Parts III and IV examine aspects of the Court's reasoning in Dura and Basic, respectively. In Dura, the Court erred in asserting that it was merely applying standard deceit doctrines of economic loss and loss causation to fraud-on-the-market claims.