Vanderbilt Law Review

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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. Amidst this conventional wisdom, one can identify two distinct characterizations of the continuities and discontinuities between the old law of deceit and the new law of fraud on the market. The first holds roughly as follows. A. securities fraud suit that invokes the fraud-on- the-market theory-though statutory in origin, and though in some ways an extension of common law-imposes liability on the same substantive terms as the law of deceit. To be sure, federal law does not incorporate every facet of common-law doctrine. Still, at their core, fraud-on-the-market claims track claims for deceit. On this view, the divergences between deceit and fraud-on-the-market claims are primarily procedural and evidentiary, rather than substantive.

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