Finance Expert Witness Opines on Alleged Securities Fraud


securities expert witnessThis case involves a class of shareholders suing the defendant corporation for securities fraud . They alleged that the defendant, a large national technology company, repeatedly misled the investing public about their main product, a computer-processing chip and violated the FINRA rules. They stated in their complaint that the defendant misled them by issuing a number of misstatements and omissions that collectively amounted to securities fraud. Specifically, the defendant stated that the corporation entered into an agreement to sell four million computer-processing chips to another company, which enticed the shareholders to purchase more of the defendant’s stock. As a result, the plaintiffs purchased said the share valuation and the stock price rose. A newspaper article, however, revealed that the deal was not true and the defendant’s stock price plummeted in the following days. Plaintiffs contended that the defendant announced the sale before the deal closed and that it failed to issue a statement announcing that the deal was no longer occurring. In response, the defendant contends that the information was immaterial and thus they were not required to report the information to shareholders.

Question(s) For Expert Witness

  • 1. What types of statements are usually issued within the industry and when are they corrected to provide shareholders with accurate information?

Expert Witness Response

Corporations must provide the public with accurate and current information on the status of the company. This is done so that shareholders and potential shareholders can make informed decisions about their investments. While the corporation was under no requirement to announce that the deal was going to take place, it did. The company made a public announcement stating that the deal had occurred when it did not. This mislead shareholders into purchasing more stock and others into investing in the company. When the deal did not take place, the corporation should have issued a statement notifying the public, but instead it chose to remain silent. Corporations must alert the public to any material information, which is information that a reasonable shareholder would want to know. In order to determine if this information is material, the change in stock price will give a good indication. If it fluctuated more than what is typical, this is an indication that the information is material. This must be analyzed before a decision on the defendant’s liability can be made, although it appears that the shareholders would have liked to know this information before purchasing the shares of stock. I am a director for a large, publicly traded corporation. I have a masters degree in accounting and hold a law degree from a prestigious university.

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