Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

Business Crimes BulletinFeaturesRegulationSecurities LitigationWhite Collar Crime

Fourth Circuit: Shareholders Face High Bar In Demonstrating Scienter

By Michael W. Mitchell and Edward Roche
February 01, 2022

A recent decision of the U.S. Court of Appeals for the Fourth Circuit analyzed the "scienter" requirement that a shareholder must meet to prevail under the federal securities laws in showing that the company or its executives fraudulently induced the shareholder to buy or retain shares. KBC Asset Management v. DXC Technology Co., No. 20-1718 (4th Cir., Dec. 1, 2021). The company or executives act with "scienter" only when they have a certain fraudulent state of mind, intending to mislead or being extremely careless about misleading shareholders. As the Fourth Circuit decision shows, shareholders must meet a high bar in demonstrating scienter to avoid early dismissal of the case. The decision also shows the fact-intensive approach courts use to distinguish fraudulent statements from those that, even if mistaken, were made innocently.

KBC Asset Management Background

DXC is a publicly traded IT company. Throughout 2017, the company successfully used cost-cutting measures to achieve its financial goals. In February 2018, DXC issued a press release touting its continued financial success. By November 2018, however, it had revised its projected revenue guidance to shareholders downward by around $800 million. The company's share price dropped as a result.

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Why So Many Great Lawyers Stink at Business Development and What Law Firms Are Doing About It Image

Why is it that those who are best skilled at advocating for others are ill-equipped at advocating for their own skills and what to do about it?

Bankruptcy Sales: Finding a Diamond In the Rough Image

There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.

The DOJ's Corporate Enforcement Policy: One Year Later Image

The DOJ's Criminal Division issued three declinations since the issuance of the revised CEP a year ago. Review of these cases gives insight into DOJ's implementation of the new policy in practice.

A Lawyer's System for Active Reading Image

Active reading comprises many daily tasks lawyers engage in, including highlighting, annotating, note taking, comparing and searching texts. It demands more than flipping or turning pages.

Protecting Innovation in the Cyber World from Patent Trolls Image

With trillions of dollars to keep watch over, the last thing we need is the distraction of costly litigation brought on by patent assertion entities (PAEs or "patent trolls"), companies that don't make any products but instead seek royalties by asserting their patents against those who do make products.