Fraud-on-the-market theory

{
  "id": "MLC-T-LAW-002224",
  "term": "Fraud-on-the-market theory",
  "field": "Law",
  "definition": "A legal doctrine in securities law that presumes investors rely on the integrity of the market price of a security, which is assumed to reflect all publicly available information. If a company makes a material misrepresentation, it is presumed to affect the market price, and investors who traded at that price are presumed to have relied on the misrepresentation. This theory eliminates the need for individual plaintiffs to prove direct reliance on a specific misstatement in class action lawsuits under Section 10(b) of the Securities Exchange Act of 1934.",
  "url": "https://mlchart.com/terminology/law/fraud-on-the-market-theory/"
}