Shanda Games Limited, et al. v. David Monk

In Basic Inc. v. Levinson, 485 U.S. 224 (1988), this Court recognized a rebuttable fraud-on-the-market presumption for establishing reliance in a securities action. That presumption is grounded on the “premise that the market price of shares traded on well-developed markets reflects all publicly available information, and, hence, any material misrepresentations.” Id. at 246. The Court therefore made that presumption available to “[a]n investor who buys or sells stock at the price set by the market” and thereby “reli[es] on the integrity of that price.” Id. at 247. But in the opinion below, the Second Circuit extended the fraud-on-the-market presumption beyond “investors who trade at the market price,” holding that it encompassed all “investors who acquire or divest themselves of stock” regardless of whether they do so in the market or at the market price. Pet. App. 42a. The question presented is whether Basic’s fraudon-the-market presumption is available to all plaintiffs who purchase or sell securities or is limited to only those who do so in an efficient market at the market price.