Document ID: ./input/supremecourt_opinions/opinions/20pdf/20-222_2c83.pdf
Page Number: 6.0

Cite as:  594 U. S. ____ (2021) 

3 

Opinion of the Court 

(2014)  (Halliburton  II ).  To  recover  damages,  a  private
plaintiff  must  prove,  among  other  things,  a  material  mis-
representation or omission by the defendant and the plain-
tiff ’s reliance on that misrepresentation or omission.  Ibid. 
This  case  concerns  the  element  of  reliance.  The  “tradi-
tional (and most direct) way” for a plaintiff to prove reliance 
is to show that he was aware of a defendant’s misrepresen-
tation and engaged in a transaction based on that misrep-
resentation.  Ibid. (internal quotation marks omitted).  In 
Basic, however, we held that a plaintiff may also invoke a
rebuttable presumption of reliance based on the fraud-on-
the-market theory.  485 U. S., at 241–247. 

The  “fundamental  premise”  of  the  fraud-on-the-market
theory underlying Basic’s presumption is “that an investor 
presumptively  relies  on  a  misrepresentation  so  long  as  it 
was reflected in the market price at the time of his transac-
tion.”  Erica P. John Fund, Inc. v. Halliburton Co., 563 U. S. 
804, 813 (2011).  To invoke the Basic presumption, a plain-
tiff must prove: (1) that the alleged misrepresentation was
publicly known; (2) that it was material; (3) that the stock 
traded  in  an  efficient  market;  and  (4)  that  the  plaintiff 
traded  the  stock  between  the  time  the  misrepresentation 
was made and when the truth was revealed.  Halliburton 
II,  573  U. S.,  at  268.    The  defendant  may  then  rebut  the 
presumption  through  “[a]ny  showing  that  severs  the  link
between the alleged misrepresentation and either the price 
received (or paid) by the plaintiff, or his decision to trade at
a fair market price.”  Basic, 485 U. S., at 248. 
  Although the Basic presumption “can be invoked by any
Rule 10b–5 plaintiff,” it has “particular significance in se-
curities-fraud class actions.”  Amgen Inc. v. Connecticut Re-
tirement Plans and Trust Funds, 568 U. S. 455, 462 (2013).
The presumption allows class-action plaintiffs to prove re-
liance through evidence common to the class.  That in turn 
makes it easier for plaintiffs to establish the predominance
requirement  of  Federal  Rule  of  Civil  Procedure  23,  which