Citation. 377 U.S 426 (1964)
Brief Fact Summary.
A man sued for damages for a violation of SEC rules in his capacity as a shareholder.
Synopsis of Rule of Law.
Violations of SEC law create a cause of action for the shareholders.
SEC law requires that proxy statements not be misleading. Defendant issued a proxy statement in connection with a proposed merger, which contained misleading statements. Plaintiff sued to block the merger, lost, and is suing for damages under the SEC laws prohibiting misleading statements in his capacity as a shareholder.
Does a violation of SEC rules give a shareholder a cause of action?
Yes, a violation of SEC rules grants a shareholder a cause of action.
The court finds that the violations of SEC law must grant the shareholders a cause of action. The court reasons that the laws were enacted by congress to protect the shareholders, and accordingly they must be able to use the legal system to insist on those protections.