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I Introduction I Introduction
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II US Supreme Court Pronouncements: Directors and Officers Are Fiduciaries II US Supreme Court Pronouncements: Directors and Officers Are Fiduciaries
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III The Federal Securities Laws: The Fiduciary Duty Misnomer III The Federal Securities Laws: The Fiduciary Duty Misnomer
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A Section 11 of the Securities Act: The Semblance of Fiduciary Standards A Section 11 of the Securities Act: The Semblance of Fiduciary Standards
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1 Statements of Belief: The Slighting of Section 11’s Prudent Man Standard 1 Statements of Belief: The Slighting of Section 11’s Prudent Man Standard
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2 Forward-Looking Statements: Abandoning the Prudent Man Standard 2 Forward-Looking Statements: Abandoning the Prudent Man Standard
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3 Would a Prudent Man or Woman Act in This Manner? 3 Would a Prudent Man or Woman Act in This Manner?
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B Section 10(b) of the Securities Exchange Act: Abandoning Fiduciary Standards B Section 10(b) of the Securities Exchange Act: Abandoning Fiduciary Standards
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1 Rejection of a Federal Fairness Standard 1 Rejection of a Federal Fairness Standard
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2 Requiring Pleading and Proof of Knowing Misconduct 2 Requiring Pleading and Proof of Knowing Misconduct
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3 Statements of Belief and Projections: Lacking Fiduciary Content 3 Statements of Belief and Projections: Lacking Fiduciary Content
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4 Puffery: Corporate Fiduciaries as Used Car Salespersons 4 Puffery: Corporate Fiduciaries as Used Car Salespersons
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5 Insider Trading: Misapplication of Fiduciary Standards 5 Insider Trading: Misapplication of Fiduciary Standards
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C Analogous Example: Investment Adviser Fees C Analogous Example: Investment Adviser Fees
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IV Summation: “Discretionaries,” Not Fiduciaries IV Summation: “Discretionaries,” Not Fiduciaries
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8 Rhetoric versus Reality: The Federal Securities Laws
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Published:April 2025
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Abstract
This chapter addresses concepts of fiduciary duty under the federal securities laws. Although the federal securities laws are premised principally on disclosure rather than substantive fairness, fiduciary duty concepts arise in several contexts. On numerous occasions, the US Supreme Court has recognized that corporate directors and officers are fiduciaries. Nonetheless, although viewed as fiduciaries, lax liability standards often prevail. The propriety of these lax liability standards has been embraced by both the US Congress and the federal courts. The consequence is that a glaring gap exists between the rhetoric and standards of liability in the federal securities law setting. As evidenced by this approach, in actuality, corporate directors and officers are not fiduciaries and their status should be redefined to accurately reflect reality. Hence, like company law, it is appropriate to define corporate directors and officers as “discretionaries” rather than cling to the fiduciary illusion.
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