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∗∗2200412mandatorydisclosureLouisD.BrandeisOtherPeople’sMoneySunlightissaidtobethebestofdisinfectants;electriclightthemostefficientpoliceman.socialwaste11SeeJohnC.Coffee,Jr.,MarketFailureandtheEconomicCaseforAMandatoryDisclosureSystem,70VA.L.REV.717(1984).SeeFRANKH.EASTERBROOK&DANIELR.FISCHEL,THEECONOMICSTRUCTUREOFCORPORATELAW290-96(1991).19293primarymarketsecondarymarketprospectus42004122/24365BOT3/4534self-regulatoryorganizationdoublejeopardyseeJonesv.SEC,115F.3d1173(4thCir.1997)117-1819901419985116200412/661931427outsidefrontcoverinsidefrontpageinsidebackpageSecuritiesActof19338200412(a)78715U.S.C.§77f(a)(2004).89dividendpolicy9stocksplit917C.F.R.§229.201(c)(2004).1020041210108913891001168921890037111contractarianscontractingcosts1111EASTERBROOK&FISCHEL,supranote1,at34.221996122004121312231999/08/27171999/01/251319991314147714200412riskfactors1515See17C.F.R.§229.503(c)(2004).(speculative)15162004121616267-862003213-252003199994112004/08/1317management’sdiscussionandanalysisoffinancialconditionandresultsofoperationsMD&A17trendinformationforwardlookinggoodfaith18PrivateSecuritiesLitigationReformActof1995SecuritiesExchangeActof19341717C.F.R.§229.303(2004).18See17C.F.R.§230.174(2004);17C.F.R.§240.3b-6(2004).1820041219update20211915U.S.C.§77z-2(2004);15U.S.C.§78u-5(2004).2017C.F.R.§240.14e-2(b)(2004).211619202004122223222391996236-4020042315U.S.C.§77b(a)(10)(2004)90162212425directselling262410253334011411142115053167425See15U.S.C.§78o(2004);17C.F.R.§240.15c2-8(2004).263591628109100036392220041227282930273313401142115316742861120032915U.S.C.§77e(b)(2)(2003).3048See17C.F.R.§240.15c2-8(b)(2004).233132rescind333128322224233See15U.S.C.§77l(a);Wigandv.Flo-Tek,Inc.,609F.2d1028,1035(2ndCir.1979).2420041234materiality35omission363435THOMASLEEHAZEN,THELAWOFSECURITIESREGULATION598-60(4thed.2002).367757326-32335-371988omissionomission2537non-expertportion3792327092000130112345622225282157157126200412duediligence1.chiefexecutiveofficergeneralmanager2.3.27384.395.403839SeeMARCI.STEINBERG,UNDERSTANDINGSECURITIESLAW160-62(3rded.2001).4092923109200038969371628200412416.424341291451626-61424316126-36401441297.44vicepresident4437302004124545HAZEN,supranote35,at365-67.3146474846471882332commonlawagency204815U.S.C.§77k(e)(2004)322004121.4912349auditattestationauditreview323637(statement)16224-2593716103335051525350STEINBERG,supranote39,at167-69.5116213-2552See15U.S.C.§7262(2004).5394§229.601(b)(5)(2004).5657comfortletter362004123.aftermarkettracingrequirement3758incomestatement5960616258SeeSTEINBERG,supranote39,at155.5917C.F.R.§230.158(2004)6015U.S.C.§77k(a)(2004)lastparagraph.61286156215U.S.C.§77k(e)(2004).38200412pricevalue636465(e)666315U.S.C.§77k(g)(2004).64Beecherv.Able,435F.Supp.397(S.D.N.Y.1975),affirmedontheothergrounds575F.2d1010(2dCir.1978).seeHAZEN,supranote35,at369.65Alpernv.UtiliCorpUnited,Inc.,84F.3d1525(8thCir.1996).66Voegev.Ackerman,364F.Supp.72,73(S.D.N.Y.1973).39676867HAZEN,supranote35,at388-92.6815U.S.C.§77k(e)&(f).40200412696993512041422004127027040143aidingandabettingCentralBankofDenver,N.A.v.FirstInterstateBankofDenver,N.A.71(b)10b-5secondaryorderivativeliability(e)substantialassistance7271511U.S.164,114S.Ct.1439(1994).72Anixterv.Home-StakeProd.Co.,77F.3d.(10thCir.1996)4420041273123scienter412373LewisD.Lowenfels&AlanR.Broomberg,ANewStandardforAidersandAbettorsUnderthePrivateSecuritiesLitigationReformActof1995,52BUS.LAW.1(1996);GarethT.Evans&DanielS.Floyd,SecondaryLiabilityUnderRule10b-5:TwoYearsAfterCentralBank,52BUS.LAW.13(1996).LewisD.Lowenfels&AlanR.Broomberg,LiabilitiesofLawyersandAccountantsUnderRule10b-5,58BUS.LAW.1157(1998).45Sarbanes-OxleyActof200274757416(Sarbanes-OxleyActof2002)82004759317417777777777545-63(1992)63119969346200412generallyacceptedauditstandardGAAS76777876guidelines779348(1991).ThomasLeeHazen,TheLawofSecuritiesRegulation(4thed.2002).MarcI.Steinberg,UnderstandingSecuritiesLaw(3rded.2001).14-34199822-3319961999.3.1910520021999.3.1950200412267-862003Sarbanes-OxleyActof20028-342004JohnC.Coffee,Jr.,MarketFailureandtheEconomicCaseforAMandatoryDisclosureSystem,70Var.L.Rev.717(1984)GarethT.Evans&DanielS.Floyd,SecondaryLiabilityUnderRule10b-5:TwoYearsAfterCentralBank,52Bus.Law.13(1996)LewisD.Lowenfels&AlanR.Broomberg,ANewStandardforAidersandAbettorsUnderthePrivateSecuritiesLitigationReformActof1995,52Bus.Law.1(1996)LewisD.Lowenfels&AlanR.Broomberg,LiabilitiesofLawyersandAccountantsUnderRule10b-5,58Bus.Law.1157(1998)5152200412TheLegalFrameworkofProspectusesMing-chiuYieAbstractIntheprimarymarket,theprospectusprobablyisthemostimportanttoolfordisclosure.Tomakeaninvestmentdecision,investorsarereliedontheinformationintheprospectussuppliedbytheis