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Loss causation – the causal connection between a
defendant s fraudulent conduct and a plaintiff s economic
loss – is a required element of a federal securities fraud
claim.
1 A typical securities class action is brought on
behalf of investors who contend they purchased a company s
stock in reliance on corporate misstatements. The investors allege
that they purchased their shares at a price artificially inflated
by the misstatements, and then suffered damage when the truth about
the misstatements was revealed to the market and the stock price
dropped.