In enacting the Private Securities Litigation Reform Act (the “Reform Act”),[1]� Congress set out to separate the wheat from the chaff in the area of securities law claims.
Congress sought to do so with statutory standards for pleading fraud in such cases that are by their nature inexact: requiring that a complaint specify “each statement alleged to have been misleading, [and] the reason or reasons why the statement is misleading”,[2]� requiring that a complaint state with “particularity” all facts on which a belief of falsity is formed,[3]� and requiring that a complaint “state with particularity facts giving rise to a strong inference” of scienter.[4]� In so doing, Congress left considerable discretion to the courts to decide what constitutes “particularity” and whether factual allegations are sufficient to give rise to a strong inference. This article explores the way in which courts within the Second Circuit have applied the Reform Act’s pleading standards for scienter.
