SEC Rule 10b-5

The Securities Exchange Act of 1934 gave the Securities and Exchange Commission (SEC) broad authority to make rules to eliminate fraud in securities trading. One of the rules that the SEC enacted is Rule 10b-5, which prohibits fraud, misrepresentation, and deceit in the sale and purchase of securities.

Language of SEC Rule 10b-5

Rule 10b-5 states: “It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,

1. To employ any device, scheme, or artifice to defraud,
2. To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
3. To engage in any act, practice, or course of business which
   operates or would operate as a fraud or deceit upon any person, in
   connection with the purchase or sale of any security.”

Enforcement for Violations of SEC Rule 10b-5

In addition to the SEC’s enforcement rights, private citizens also have the right to file lawsuits against companies and individuals for violations of Rule 10b-5. Typically, Rule 10b-5 claims are applied in lawsuits involving:

• insider trading,
• market manipulation,
• fraud in connection with public offerings and takeovers, and
• fraud in connection with the purchase or sale of securities.

SEC Whistleblowers

We encourage people with knowledge of securities violations to contact us. Under the SEC whistleblower laws promulgated under the Dodd-Frank Wall Street Reform and Consumer Protection Act, SEC whistleblowers may be receive a reward of up to 30 percent of the recovery for information leading to a successful enforcement action by the SEC.

How to report Rule 10b-5 fraud

You can report SEC Rule 10b-5 fraud to a private attorney, who may be able to help you file a securities lawsuit: