Thursday, November 7, 2013

In re Worlds of Wonder Securities Litigation case brief

In re Worlds of Wonder Securities Litigation case brief summary
35 F.3d 1407 (1994)

Appellant investors challenged a grant of summary judgment in favor of appellees, directors and accountants, from the United States District Court for the District of California, which held that under the Securities Act of 1933, 15 U.S.C.S. § 77k, appellees did not fraudulently misrepresent stock values.

A successful toy corporation engaged in a public offering of debentures, also known as "junk bonds," in an attempt to further boost business revenue. A subsequent turn of events relating to the corporation's uncontrolled growth resulted in a financial catastrophe. As a result, appellant investors brought suit against appellee directors alleging the prospectus offered in connection with the offering was false and misleading pursuant to the Securities Act of 1933, 15 U.S.C.S. § 77k. Litigation ensued and the district court dismissed the claims, granting appellees summary judgment based upon the fact that the prospectus adequately disclosed the risks of the bonds. Appellants challenged this decision, arguing that both appellee directors and appellee accountants engaged in misrepresentations concerning stock value.

  • Upon final determination, the court affirmed but reversed as to appellee accountants. 
  • Essentially, the court held that disputed issues of fact existed concerning inaccurate stock quotes.


The judgment was affirmed on the grounds that appellee directors did not misrepresent the proposed lives of varied "junk bonds" where sufficient warnings of risk were outlined in an issued prospectus. The judgment was reversed as to the liability of appellee accountants since evidence of inflated estimates existed.

Suggested Study Aids For Securities Regulation Law
Securities Regulation in a Nutshell, 10th (Nutshell Series)
Securities Regulation: Examples & Explanations, 5th Edition
Securities Regulations: The Essentials

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