Within the Securities Exchange Act of 1934 is SEC Rule 14a-9, which introduces the reader to anti-fraud rules and disclosure concepts generally, such as:
- implication of private rights of action to sue for violation of the rules
- Standing to sue
- materiality of omitted or misleading statements and information
- The required state of mind (also known as scienter)
- Reliance (transaction causation )
- Causation (loss causation )
- Remedies for violation of some of the rules
In contested corporate election, one or the other side, or both, often claims that their opponent is attempting to achieve victory through innuendo, misleading statements, misinterpretation, nondisclosure or outright fraud practised upon the shareholders. The losing side may make those claims in a lawsuit after the fact, but more often the contending factions will seek to enjoin the alleged offending statements and to enjoin the use of any proxies already obtained.
In publicly held corporations, the plaintiffs would do so under SEC Rule 14a-9, which provides that "[n]o solicitation subject to this regulation shall be made by means of any proxy statement, form of proxy, notice of meeting, or other form of communication, written or oral, containing any statement which, at the time and in light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary to make the statemetns made therein not false or misleading ..." By contrast, if the corporation is not a section 12(g) corporation under the Securities Exchange Act, the losing side must make out its disclosure claims under state law.
Implementing that braod mandate, the SEC has adopted a broad antifraud rule that on its face does not require a plaintiff to prove any degree of fault on a defendant's part but which court have dtermiend requires a showing of lack of reasonable care. On the other hand, state courts require that the losing side in an election prove that any misleading statement, exaggeration or innuendo is the product of intentional of reckless conduct (that is, scienter).
SEC Rule 14a-9(a) - this rule applies to omission or misleading statements "in connection with any tender offer or request or invitation for tendres, or any solicitation of security holders in opposition to or in favor of any such offer, request, or invitation."