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 Business Crimes Bulletin 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
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.

The DOJ's New Parameters for Evaluating Corporate Compliance Programs Image

The parameters set forth in the DOJ's memorandum have implications not only for the government's evaluation of compliance programs in the context of criminal charging decisions, but also for how defense counsel structure their conference-room advocacy seeking declinations or lesser sanctions in both criminal and civil investigations.

Use of Deferred Prosecution Agreements In White Collar Investigations Image

This article discusses the practical and policy reasons for the use of DPAs and NPAs in white-collar criminal investigations, and considers the NDAA's new reporting provision and its relationship with other efforts to enhance transparency in DOJ decision-making.

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.

Compliance Officers: Recent Regulatory Guidance and Enforcement Actions and Mitigating the Risk of Personal Liability Image

This article explores legal developments over the past year that may impact compliance officer personal liability.