Scienter As Element of Securities Fraud Claim
In the United States, in order to prevail in a securities fraud claim under Section 10(b) of the Securities Exchange Act of 1934, a plaintiff must allege and prove that the defendant acted with scienter. The Private Securities Litigation Reform Act of 1995 added the requirement that a plaintiff must plead facts giving rise to a "strong inference" of scienter. The meaning of scienter under this law has been highly controversial since the enactment of the PSLRA. In 2007, the United States Supreme Court issued a decision in which it clarified what was to be understood as a "strong inference". In Tellabs, Inc. v. Makor Issues & Rights, LTD (21 June 2007), by an 8-1 ruling, the Court defined the standard that the plaintiff should meet in order to proceed with a securities fraud litigation : a complaint must show "cogent and compelling evidence" of scienter.
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