If so, the statute should spell out precisely when the defendant has the requisite scienter.
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No showing of scienter is necessary to establish a violation of Section 10A. SEC v.
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Realistically, though, legislators typically will not excuse defendants who have sufficiently bad scienter.
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The plaintiffs also have to show executives acted with scienter, or guilty conscience.
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The district judge dismissed the complaint for failing to allege sufficient facts to properly plead the requisite scienter for fraud.
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Those defendants had strong arguments that they neither controlled PwC India nor culpably participated in the fraud (ie, acted with scienter).
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But beyond Rule 10b-5, there are many state securities laws which require no scienter and are broader in their reach than Rule 10b-5.
In other words, the choice to avoid the word Shariah is likely to be a central evidentiary proof at trial on the issue of scienter.
Unfortunately, Section 512 has been a failure at circumscribing disqualifying scienter.
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But Judge Kaplan has sustained an allegation against EY that implies scienter and it refers to statements made in a review of a 10-Q.
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The lawsuit accused Boeing executives of hiding structural problems with the 787 Dreamliner that would delay its launch last year, saying Boeing Chief James McNerney and others acted with scienter, or guilty knowledge.
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Similarly, whether a reasonable investor would deem that Sokol acted with the scienter to defraud is also beyond any present credible legal analysis because we know too few facts concerning the transaction.
In all of these areas, and more, the materiality and scienter issues discussed above will play into the calculus for the legal advisor as the examination of these and other exogenous elements unfold.
For example, under federal securities laws, there are statutes and rules permitting SEC administrative and civil enforcement actions and private causes of action which do not impose a requirement to plead or prove scienter.
In recent cases brought under sections 17(a)(2) and 17(a)(3) of the Securities Act, the Securities and Exchange Commission has alleged that there was fraudulent conduct but does not allege that the defendant acted with scienter.
In the Citigroup lawsuit, for example, lawyers needed to show that bank executives acted with scienter, or guilty knowledge, when they loaded the bank up with soon-to-be-worthless derivatives that were a byproduct of their mortgage-backed securities business.
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But the due diligence requirements implied in the scienter element of many types of fraud actions and provided expressly as defenses under securities laws are only one component of the due diligence analysis pertinent to the question of civil and criminal liability for SCF.
Those do not require scienter.
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There will be a natural tendency by practitioners to treat materiality and scienter as high hurdles for a government prosecution, an SEC enforcement action, or a private civil claim because these lawyers have treated Shariah as a black box into which they have refused to peer.
Their failure to inquire further puts one in mind of ostrich tactics of failing to inquire for fear that the inquiry might reveal stronger evidence of their scienter regarding the authenticity of the confidential source than the flimsy evidence of scienter they were able to marshal against Boeing.
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An additional facet of the disclosure complex, especially as it relates to the scienter standard of recklessness, is the implication for the financial institutions and their professional advisors of a duty to conduct a reasonable due diligence to make certain that what they have said about SCF is the whole of the material truth.
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