Opinion ID: 201963
Heading Depth: 3
Heading Rank: 3

Heading: Other Arguments Supporting the Prevailing

Text: Definition of Market Efficiency PolyMedica points to statements made by the United States Securities and Exchange Commission (SEC) supporting the prevailing definition of market efficiency. See Brief for the Securities and Exchange Commission as Amicus Curiae, Basic v. 17 We did not, however, determine the standard for market efficiency in Roeder. That case required us to decide whether the fraud-onthe-market theory creates an affirmative duty to disclose material information to the public. We concluded that it does not, and stated that once plaintiffs have demonstrated breach of a duty to disclose material information, the fraud-on-the-market theory merely obviates the need for a plaintiff to prove reliance on the nondisclosure. We noted in dicta that this presumption of reliance stems from a plaintiff's reliance on market price which necessarily reflects that nondisclosure. -28- Levinson, 485 U.S. 224 (1988) (No. 86-279), available at 1987 WL 881068, at  (stating that fraud-on-the-market theory rests on proposition that in an active secondary market, the price of company's stock is determined by all material information regarding the company and its business); see also Arthur Levitt, Chairman, U.S. Securities and Exchange Commission, Testimony before House Subcomm. on Telecomm. & Fin., 104th Cong. 13 (Feb. 10, 1995), available at http://www.sec.gov./news/testimony/testarchive/1995/ spch025.txt. PolyMedica also argues with some force that the district court's definition is logically inconsistent. By requiring that an efficient market need only be affected by most but not all material information in order to be efficient, the district court's definition allows some information to be considered material and yet not affect market price. Cf. In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1425 (3d Cir. 1997) (stating that [i]n the context of an 'efficient' market, the concept of materiality translates into information that alters the price of the firm's stock).