Vanderbilt Law Review


James D. Cox

First Page



The securities antifraud provision is a bastard. It has no indisputable parentage; its existence is attributed to a federal statute, but its features are borrowed from state law, a body of law that the enacting Congress presumably believed was inadequate.' Why would Congress borrow from state law that it considered deficient? Even though the antifraud provision has come of age largely through judicial construction similar to the laudatory process that underlies our common law, critics attack the antifraud provision like no comparable common-law development. To many scholars, private antifraud suits are not viewed as a net benefit, but as a menace. As a consequence, the fate of future suits under the antifraud provision always appears to hang in the balance of the next Supreme Court decision. The uncertainty is because most Supreme Court decisions construing the statute have largely restricted the scope of the antifraud provision; over the years, the Supreme Court has limited the antifraud private cause of action through decisions regarding who has standing to sue, what constitutes culpable conduct, and who is responsible for fraudulent conduct. On each of these issues, the Supreme Court has restrained the scope of the private action.