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Moody Investing and the Supreme Court: Rethinking the Materiality of Information and the Reasonableness of Investors

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  • Peter Huang

    (University of Pennsylvania Law School)

Abstract

This Article critically analyzes the judicial decisions and reasoning of the United States Supreme Court and lower courts accepting certain defenses in securities fraud litigation. This Article develops how and why the core notions of materiality of information and the reasonable investor should be revised in light of recent empirical data, experimental evidence, and theoretical models of moody investing. This Article proposes modifying three recent developments in materiality doctrine to take into account moody investing. In particular, this Article argues that current judicial treatment of puffery is flawed because it neglects the power of puffery to alter moods. This Article also recommends modifying the judicial "total mix" analysis of the materiality of information to include a "total affect" analysis of information. Finally, this Article proposes refining the judicially created so-called "bespeaks caution" doctrine and statutory safe harbors codifying it to inquire whether so-called "meaningful cautionary language" is infused with affect.

Suggested Citation

  • Peter Huang, "undated". "Moody Investing and the Supreme Court: Rethinking the Materiality of Information and the Reasonableness of Investors," Scholarship at Penn Law upenn_wps-1008, University of Pennsylvania Law School.
  • Handle: RePEc:bep:upennl:upenn_wps-1008
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    File URL: http://lsr.nellco.org/cgi/viewcontent.cgi?article=1008&context=upenn/wps
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    Cited by:

    1. Niamh Brennan & Sidney J. Gray, 2005. "The Impact of Materiality: Accounting's Best Kept Secret," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 1(1), pages 1-30.
    2. Ping-Sheng Koh & David M. Reeb & Wanli Zhao, 2018. "CEO Confidence and Unreported R&D," Management Science, INFORMS, vol. 64(12), pages 5725-5747, December.
    3. Marco Venuti, 2012. "The proposal for updating the EU Accounting Directives: The adequacy of the proposal versus the legislative targets," FINANCIAL REPORTING, FrancoAngeli Editore, vol. 2012(4), pages 65-85.

    More about this item

    Keywords

    Moody Investing; materiality; reasonable investor; securities regulation; puffery; total mix of information; bespeaks caution doctrine;
    All these keywords.

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