Of the vast amounts of statutory and quasi-statutory material governing the securities business, the Securities and Exchange Commission's rule 10b-51 has potentially the greatest direct importance to the largest number of people. While several provisions in the government's regulatory scheme set more or less specific standards of conduct for securities issuers, broker-dealers, or corporate insiders, the anti-fraud provisions of rule 10b-5 apply to all persons directly or indirectly connected with any sale or purchase of securities transacted through a facility of interstate commerce, the mails, or on a national exchange. In its three clauses, rule 10b-5 forbids any person (1) to employ devices or schemes to defraud, (2) to misrepresent a material fact or to omit a material fact which causes any statement made to be misleading, or (3) to engage in any practice which would operate as a fraud or deceit upon any person. Rule 10b-5 was promulgated by the SEC under the authority of section 10(b) of the Securities Exchange Act of 1934 in order to enable the Commission to protect the market from fraud. The rule assumed its broad significance, however, when the courts indicated a willingness to imply a private civil remedy in favor of both buyers and sellers injured by its violation.
Michigan Law Review,
Proof of Scienter Necessary in a Private Suit Under SEC Anti-Fraud Rule 10b-5,
Mich. L. Rev.
Available at: https://repository.law.umich.edu/mlr/vol63/iss6/7