In Re: NYSE SPECIALISTS SECURITIES LITIGATION CALIFORNIA PUBLIC EMPLOYEES’ RETIREMENT SYSTEM, and EMPIRE PROGRAMS, INC. v. NEW YORK STOCK EXCHANGE, INC.
Docket No. 06-1038-cv
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
September 18, 2007
August Term, 2006 (Argued: February 26, 2007)
Lead plaintiffs-appellants (“Lead Plaintiffs“) appeal from a judgment of the United States District Court for the Southern District of New York (Sweet, J.), granting defendant-appellee the New York Stock Exchange, Inc.‘s (the “NYSE” or the “Exchange“) motion to dismiss the complaint, which alleged various violations of the Securities Exchange Act of 1934 (the “Exchange Act“), stemming from claims that the NYSE failed to regulate and provide a fair and
AFFIRMED in part, VACATED in part and REMANDED.
ERIC ALAN ISAACSON (William S. Lerach, Mark Solomon, Byron S. Georgiou, William J. Doyle II, Tami Falkenstein Hennick, Lucas F. Olts, on the brief), Lerach Coughlin Stoia Geller Rudman & Robbins LLP, San Diego, CA; and Christopher Lovell, Imtiaz A. Siddiqui, on the brief, Lovell Stewart Halebian LLP, New York, NY, for Lead Plaintiffs-Appellants.
DEBRA M. TORRES, Fried, Frank, Harris, Shriver & Jacobson LLP, New York, NY, for Defendant-Appellee.
SOTOMAYOR, Circuit Judge:
Lead plaintiffs-appellants California Public Employees’ Retirement System (“CalPERS“) and Empire Programs, Inc. (“Empire“) (collectively “Lead Plaintiffs“) appeal from a judgment of the United States District Court for the Southern District of New York (Sweet, J.), In re NYSE Specialists Secs. Litig., 405 F. Supp. 2d 281 (S.D.N.Y. 2005) (”In re NYSE Specialists“), granting defendant-appellee New York Stock Exchange, Inc.‘s (the “NYSE” or the “Exchange“)
BACKGROUND
Because this appeal challenges the grant of a motion to dismiss, we must take the facts alleged in the complaint as true, drawing all reasonable inferences in Lead Plaintiffs’ favor. See Port Washington Teachers Ass‘n v. Bd. of Educ. of Port Washington Union Free Sch. Dist., 478 F.3d 494, 498 (2d Cir. 2007). Taken in this light, the facts are as follows.
The NYSE is registered with the Securities and Exchange Commission (“SEC“) as a national securities exchange pursuant to section 6 of the Exchange Act,
The NYSE and the Specialist Firms
According to the complaint, the NYSE was at all times relevant to the action (the “Class Period“) a nonprofit corporation, charged with overseeing the world‘s largest stock exchange, which lists over 2,800 publicly traded companies.1 The NYSE is organized under the principle that investors in the companies traded on its floor, whether individual or institutional, are entitled to equal opportunities to interact and receive the best prices available on their trades. Because the Exchange itself does not execute the actual trading in these 2,800 companies, it facilitates this auction market by funneling trades through seven Specialist Firms (the “Specialist Firms” or the “Firms“), which are charged with managing “the stocks assigned to them to create a fair, competitive, orderly and efficient market.” Consolidated Compl. ¶ 37.
Each security listed for trading on the NYSE is assigned to a particular Firm. To execute purchases and sales of a particular security, buyers and sellers must present their bids to buy and offers to sell to the specific Specialist Firm assigned to that security. The primary method of trading on the Exchange occurs through the NYSE‘s Super Designated Order Turnaround System, which transmits orders to buy and sell to the Specialist Firm electronically. The orders
By acting as either the agent for investors or principal for itself in the sale and purchase of the individual securities to which they are each assigned, the Firms are required to make and display continuous two-sided quotations that accurately reflect prevailing market conditions in order to maintain a liquid and continuous two-sided public auction. When acting as agent, the Specialist Firms match the orders of buyers and sellers, whose bids and offers appear on the display book, and thus ensure the timely execution of trades at the best available price. When acting as principal, the Specialist Firms
[a]re permitted to execute, in certain limited circumstances, trades on a “principal” or “dealer” basis, when required to do so to maintain a fair and orderly market. In such circumstances, such as if there were no matching orders to sell and orders to buy, the specialist was permitted to execute an investor‘s order to buy stock by selling the stock from the specialist‘s proprietary account, or “inventory” of stock, to the investor. Additionally, the specialist was permitted to execute an investor‘s order to sell stock by buying that stock and holding the stock in the investor‘s inventory.
In re NYSE Specialists, 405 F. Supp. 2d at 290.
The substantial powers of, and the near-total control exercised by, the Specialist Firms over any given stock on the NYSE create an opportunity to manipulate the market for self-gain. The complaint alleges that “[t]he Specialist Firm is constantly in a position to trade for its own proprietary accounts while in possession of material non-public information regarding the supply and demand for a given stock, in part through its knowledge of existing but unexecuted” orders.
Lead Plaintiffs allege that during the Class Period, the Specialist Firms actively took advantage of their unique position to self-deal and that the NYSE neglected or abandoned its regulatory duties and oversight of the Specialist Firms by permitting and in some cases encouraging blatant self-dealing. Through “wide-ranging manipulative, self-dealing, deceptive and misleading conduct,” the Firms and the Exchange allegedly violated several sections of the Exchange Act, SEC rules, and the NYSE‘s own rules and regulations. In the complaint, Lead
- “Interpositioning,” whereby a Specialist Firm prevented the normal agency trade between matching public orders and instead interposed itself between the matching orders in order to generate profits for itself.
- “Trading ahead,” in which a Specialist Firm undertook trades for its own account before undertaking trades for public investors. Because the Specialist Firm knew how the public investors’ orders would impact the stock price, it used this confidential knowledge to its own commercial advantage.
- “Freezing the book,” whereby a Specialist Firm froze its display book for a given stock in order to engage in trades for its own account first before undertaking any orders for public investors.
- Manipulating the “tick,” whereby a Specialist Firm changed the price of the stock to affect principal trades.
The fifth type of misconduct alleged by Lead Plaintiffs involves the effort to conceal evidence of the Specialist Firms’ malfeasance, in which the NYSE actively sought to help the Firms skirt or violate the securities laws by, inter alia, falsifying reports, tipping off Specialist Firms to impending investigations, and covertly encouraging misconduct. This wide-ranging fraudulent scheme allegedly resulted in hundreds of millions of dollars in illicit profits for the Firms and the NYSE.
The SEC Report and Enforcement Actions Against the NYSE and Specialist Firms
According to the complaint, the “complete and utter failure of the NYSE to regulate the Specialist Firms’ conduct during the Class Period” is detailed in a November 3, 2003 Wall Street Journal article describing the contents of a confidential SEC report prepared as part of an official SEC investigation of the NYSE and the Firms, begun in early 2003. Consolidated Compl. ¶ 230. The article summarized the report‘s conclusions about the Exchange‘s regulatory failures,
This newspaper article was followed several months later by announcements on March 30, 2004 and July 26, 2004 from the SEC that it had come to settlement agreements with each of the Specialist Firms, in which the Firms acknowledged that they had failed to maintain a fair and orderly market for their assigned securities as required by law. The Specialist Firms consented to the announced settlement, without admitting or denying the findings, that they had violated the Exchange Act through fraud and manipulation. The Firms further agreed to pay to the SEC settlements totaling nearly 250 million dollars for their transgressions.
On April 12, 2005, the SEC announced the simultaneous filing and settlement of “an enforcement action against the New York Stock Exchange, Inc.,” which indicated that the “NYSE consented, without admitting or denying the findings, to entry of an order imposing a censure and requiring the NYSE to cease and desist from future violations of the federal securities laws.” Press Release, Sec. & Exch. Comm‘n, SEC Charges the New York Stock Exchange with Failing to Police Specialists (Apr. 12, 2005), available at http://www.sec.gov/news/press/2005-53.htm. The announcement further noted:
[s]pecifically, the Commission‘s Order finds that from 1999 through 2003, various NYSE specialists repeatedly engaged in unlawful proprietary trading, resulting in more than $158 million of customer harm. The improper trading took
various forms, including “interpositioning” the [F]irms’ dealer accounts between customer orders and “trading ahead” for their dealer accounts in front of executable agency orders on the same side of the market. From 1999 through almost all of 2002, the NYSE failed to adequately monitor and police specialist trading activity, allowing the vast majority of this unlawful conduct to continue. The illegal trading went largely undetected because the NYSE‘s regulatory program was deficient in surveilling, investigating and disciplining the specialists’ trading violations.
Id. The Exchange, as a result of this settlement, agreed to implement new oversight methods and to fund their implementation to the sum of $20 million.
The Alleged Misrepresentations
Throughout the Class Period, the NYSE repeatedly made public statements about the operations of its Specialist Firms and its oversight of their daily functions. For instance, in a press release dated January 8, 2001, the Exchange allegedly stated: “Our agency-auction model joins the greatest liquidity and transparency with the most efficient method of price discovery, leading to the lowest execution costs and best prices for customers.” The NYSE ran advertisements featuring Warren Buffet of Berkshire Hathaway, who touted the savings in transaction costs for his company achieved through listing on the Exchange, and who further observed that “[w]e wanted the best market that we could obtain for our shareholders. The NYSE is that market.” Moreover, high-level employees of the Exchange, including its then-Chairman Richard Grasso, issued public statements that assured the public of the NYSE‘s integrity and its longstanding commitment to an open and fair market. Lead Plaintiffs claim that these statements deliberately created “the false impression that [the Exchange] was overseeing and operating its auction market in accordance with laws, rules and regulations, and l[ed] investors to believe that the NYSE was an honest and fair market,” and that they relied on these
The Instant Suit
On October 17, 2003, a class action suit was filed in the United States District Court for the Southern District of New York against the Specialist Firms and the NYSE. Several related class actions were also subsequently filed in the same court. On May 27, 2004, the district court entered an order consolidating the related cases, choosing CalPERS and Empire as Lead Plaintiffs, and appointing lead counsel. Lead Plaintiffs filed an amended consolidated complaint, and the defendants, including NYSE, moved to dismiss under Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure. In a published opinion, the district court denied the motions as to the individual defendant Specialist Firms, but granted the NYSE‘s Rule 12(b)(6) motion on the basis that as an SRO, it enjoyed absolute immunity on Lead Plaintiffs’ claims that the Exchange had abandoned its regulatory duties and that the Lead Plaintiffs lacked standing under Rule 10b-5,
DISCUSSION
We review de novo a district court‘s grant of a motion to dismiss for failure to state a claim under Rule 12(b)(6). Nicholas v. Goord, 430 F.3d 652, 657 (2d Cir. 2005). A court should not dismiss a case on such a motion “unless . . . satisfied that the complaint cannot state any set of facts that would entitle the plaintiff to relief.” Miller v. Wolpoff & Abramson, L.L.P., 321 F.3d 292, 300 (2d Cir. 2003). Towards this end, we must accept all allegations in the complaint as
We first consider whether the NYSE is entitled to absolute immunity from claims stemming from either the Exchange‘s active or passive complicity in the Specialist Firms’ misconduct, and then turn to address whether Lead Plaintiffs have standing to bring their Rule 10b-5 claim for the Exchange‘s alleged misrepresentations concerning its regulatory activities and the integrity of its market.
I. Absolute Immunity
Absolute immunity affords “complete protection from suit,” Harlow v. Fitzgerald, 457 U.S. 800, 807 (1982), because it gives “public officials entrusted with sensitive tasks a protected area of discretion within which to carry out their responsibilities,” Barr v. Abrams, 810 F.2d 358, 361 (2d Cir. 1987), so that they will not feel “constrained in making every decision by the consequences in terms of [their] own potential liability in a suit for damages,” Imbler v. Pachtman, 424 U.S. 409, 424-25 (1976). The doctrine‘s nature “is such that it ‘accords protection from . . . any judicial scrutiny of the motive for and reasonableness of official action,‘” Shmueli v. City of New York, 424 F.3d 231, 237 (2d Cir. 2005) (quoting Robison v. Via, 821 F.2d 913, 918 (2d Cir. 1987)), even where the challenged conduct was motivated by a wrongful motive or even malice, Bernard v. County of Suffolk, 356 F.3d 495, 503 (2d Cir. 2004) (citing Cleavinger v. Saxner, 474 U.S. 193, 199-200 (1985)). Given this significant protection, we have
Although the NYSE is not a government entity, we have recognized that in certain circumstances, it is entitled to absolute immunity for actions it takes pursuant to its quasi-governmental role in the regulation of the securities market. See Barbara, 99 F.3d at 58 (“Although the Exchange is a private, rather than a governmental entity, immunity doctrines protect private actors when they perform important governmental functions.“). Indeed, as in other absolute immunity contexts, we focus on “the nature of the function performed, not the identity of the actor who performed it,” Forrester v. White, 484 U.S. 219, 229 (1988), in order to determine whether an SRO, such as the Exchange, is entitled to immunity, see D‘Alessio, 258 F.3d at 104-06 (applying functional approach to determine whether the NYSE was entitled to immunity). Applying this analysis, we have found stock exchange SROs absolutely immune from suit where the alleged misconduct concerned (1) disciplinary proceedings against exchange members, Barbara, 99 F.3d at 59; (2) the enforcement of security rules and regulations and general regulatory oversight over exchange members, D‘Alessio, 258 F.3d at 106; (3) the interpretation of the securities laws and regulations as applied to the exchange or its members, id.; (4) the referral of exchange members to the SEC and other government agencies for civil enforcement or criminal prosecution under the securities laws, id.; and (5) the public
[t]he NYSE, as a[n] SRO, stands in the shoes of the SEC in interpreting the securities laws for its members and in monitoring compliance with those laws . . . [i]t follows that the NYSE should be entitled to the same immunity enjoyed by the SEC when it is performing functions delegated to it under the SEC‘s broad oversight authority.
Id. at 105. Thus, so long as the “alleged misconduct falls within the scope of the quasi-governmental powers delegated to the NYSE,” absolute immunity attaches. Id. at 106.
Lead Plaintiffs argue that under our precedents, the doctrine of absolute immunity applies solely when SROs act (1) affirmatively and (2) consistently with the powers delegated to NYSE in its quasi-governmental role. Because the allegations demonstrate that the NYSE failed to regulate and at times actually participated in fraud and misconduct, Lead Plaintiffs further contend, the doctrine does not bar their claims. We disagree.
Lead Plaintiffs first argue that our prior decisions in this area have protected only the affirmative assertion of regulatory power by an SRO and that immunity does not exist where the NYSE does not act and has essentially, in their words, “abandoned” its duty to regulate. In D‘Alessio, however, we expressly found the NYSE absolutely immune where plaintiff complained of NYSE‘s “fail[ure] to monitor D‘Alessio‘s and other floor [members‘] compliance” with securities law and regulations because such conduct “plainly falls within the scope of the quasi-governmental duties delegated to the NYSE.” 258 F.3d at 106 (emphasis added). While this discussion in D‘Alessio was cursory, as the case focused on other allegations
Our understanding of immunity is further buttressed by this Circuit‘s prior decisions in other absolute immunity contexts where, for instance, a prosecutor, protected by absolute immunity in the decision to prosecute an individual, was similarly found immune for the decision not to prosecute. Schloss v. Bouse, 876 F.2d 287, 290 (2d Cir. 1989) (“[A]s a matter of logic, absolute immunity must also protect the prosecutor from damages suits based on his decision not to prosecute.“); see also Mangiafico v. Blumenthal, 471 F.3d 391, 396 (2d Cir. 2006) (“[W]e can divine no meaningful difference between the Attorney General‘s decision in this case not to
In their second argument, Lead Plaintiffs, relying on D‘Alessio, 258 F.3d at 106, assert that an SRO receives absolute immunity only “when acting in its capacity as a[n] SRO” and only to the extent that it “engages in conduct consistent with” its regulatory powers (i.e., no absolute immunity when an SRO acts inconsistently with the regulatory goals of the SEC). This position certainly has superficial appeal, but when scrutinized, its flaws become evident. First, we cannot square our holdings in D‘Alessio, Barbara, or DL Capital, with Lead Plaintiffs’ assertion here. In all three cases, the alleged misconduct of the SRO stock exchanges involved acts or determinations that could easily be characterized as inconsistent with the powers or functions delegated to them or beyond their capacities as SROs because the organizations had violated the very rules they were supposed to enforce. See D‘Alessio, 258 F.3d at 98 (plaintiff alleged that the NYSE provided government investigators with “false, misleading and inaccurate information” about him and that the NYSE had failed to disclose to the SEC that it had “approved and encouraged” the practice for which plaintiff was charged) (internal quotation marks omitted); Barbara, 99 F.3d at 52 (plaintiff claimed that the NYSE wrongfully barred him from the exchange floor, causing him to leave the securities business); DL Capital, 409 F.3d at 96 (plaintiff alleged that the NASDAQ had committed fraud by “failing to disclose” its decision
Second and more importantly, the central question our SRO-immunity cases ask is not whether the SRO is acting (or not acting) “consistent with” the laws it is supposed to apply but rather whether the plaintiff‘s allegations concern the exercise of powers within the bounds of the government functions delegated to it. Under our precedent, the immunity protects the power to regulate, not the mandate to perform regulatory functions in a certain manner. Thus, the immunity depends only on whether specific acts and forbearances were incident to the exercise of regulatory power, and not on the propriety of those actions or inactions. Indeed, if “consistent with” and “capacity” meant that immunity only attaches to those who follow the law, the immunity doctrine would be effectively subverted. After all, individuals characteristically do not bring suit alleging an SRO is obeying its statutory and legal obligations; they bring suit alleging an SRO is violating the law or acting inconsistently with its legal obligations. Lead Plaintiffs here are accordingly asking us to carve out an exception that would all but swallow the doctrine
In sum, the proper way to read D‘Alessio‘s use of the terms “consistent with” and “capacity” is to focus on the specific function at issue in the allegations of misconduct to determine whether the conduct is “consistent with” the exercise of power delegated to the SRO and for which this Court has accorded absolute immunity. If such conduct was within the ambit of the SRO‘s delegated power, immunity presumptively attaches, even where the SRO wrongly exercises that power.
A. Application
Given this understanding of our caselaw, it is clear that the misconduct alleged by Lead Plaintiffs readily falls within the ambit of the quasi-governmental functions the SEC has delegated to the NYSE. Indeed, of the five categories of misconduct that Lead Plaintiffs allege in their complaint (interpositioning, trading ahead, freezing the book, manipulating the tick, and
We confront a somewhat thornier question in evaluating the allegations that the NYSE knowingly permitted, or even actively encouraged, the Specialist Firms to submit doctored or altered regulatory reports to the NYSE and that it alerted the Specialist Firms to impending internal NYSE investigations so that the Firms could conceal evidence of wrongdoing. Lead Plaintiffs’ allegations here focus on the NYSE‘s approach to weekly Form 81 Reports (“Form 81“), which every Specialist Firm was required to submit when it engaged in principal trades. The NYSE floor officials, Lead Plaintiffs claim, permitted their names and badge numbers to be used in preparing false Form 81s, essentially vouching for trades that they knew to be improper or wrong and even when the NYSE discovered a possible falsification, it would send the relevant Form 81 back to the Firm and permit the Form 81 to be resubmitted with the “correct” information. Officials at the Exchange also allegedly “tipped off” at least one of the Specialist Firms about an imminent investigation before the official announcement, permitting it, now forewarned, to alter its records to conceal its misconduct. At first glance, none of these actions appears to fall within the ambit of the powers delegated to the Exchange. The gravamen of the Lead Plaintiffs’ claims, however, centers on the functions performed by NYSE in its supervisory
B. The Fraud Exception
Lead Plaintiffs also argue that the wide-ranging misconduct and fraud allegedly permitted or undertaken here by the NYSE should qualify as an exception to the absolute immunity bar. They cite our decision in DL Capital Group where we stated that
precedent, not to mention common sense, strongly militates against carving out a
“fraud” exception to SRO immunity. As to precedent, this Court has already implicitly held that SROs are absolutely immune to suits alleging fraud. In D‘Alessio, after all, we upheld the dismissal of all the plaintiffs’ claims even though one of the claims was for “fraudulent deceit and concealment.” . . . Not only that, but this Court has, in other contexts, made clear that allegations of bad faith, malice, and even fraud – all of which may be relevant to a qualified immunity analysis – cannot, except in the most unusual of circumstances, overcome absolute immunity.
409 F.3d at 98 (citations and footnote omitted). Lead Plaintiffs contend that this case presents the “most unusual of circumstances,” thus entitling them to overcome whatever grant of absolute immunity this Court might otherwise accord. While we agree that the abuse of trust fraud purportedly engaged in by the Specialist Firms and the Exchange over the years-long Class Period appears egregious, we still conclude that a fraud exception should not apply here – even a one-time, “most unusual circumstances” exception. Indeed, courts have applied the absolute immunity doctrine without carving out a fraud exception even in cases alleging fraud in situations that directly implicate constitutionally protected personal liberty interests in the criminal context, including a case where a prosecutor allegedly committed fraud upon the courts in a criminal prosecution for capital murder, Imbler, 424 U.S. at 416 (alleged prosecutorial misconduct included knowingly permitting false testimony at trial and submitting altered evidence to the jury), or where allegedly unconstitutional restrictions were placed on a grand juror attempting to investigate official misconduct, Fields v. Soloff, 920 F.2d 1114, 1119 (2d Cir. 1990). If a fraud exception is not warranted in those situations where an individual‘s very liberty may be at stake, we conclude such an exception is also not appropriate here. Moreover, while Lead Plaintiffs characterize this case as representing the “most unusual of circumstances,” an exception here may open a Pandora‘s box that would undermine the entire purpose behind the
Lastly, we have cautioned before that courts confronted with claims of absolute immunity should consider “whether there exist alternatives to damage suits against the official as a means of redressing wrongful conduct” if absolute immunity applies. Barrett, 798 F.2d at 571 (citing Mitchell v. Forsyth, 472 U.S. 511, 521-23 (1985)). The alternatives here are manifold. The SEC, after all, retains formidable oversight power to supervise, investigate, and discipline the NYSE for any possible wrongdoing or regulatory missteps. See, e.g., DL Capital Group, 409 F.3d at 95 (“[I]f an SRO has violated, or is unable to comply with, inter alia, the provisions of the Exchange Act, its own rules, or the rules of the SEC, the SEC is authorized to suspend or even revoke an SRO‘s registration, as well as to impose lesser sanctions.“) (citing
For all of the reasons stated above, we conclude the NYSE is entitled to absolute immunity and affirm the district court‘s determination on this issue.
II. Lead Plaintiffs’ Standing to Sue for the NYSE‘s Alleged Misrepresentations
The district court concluded that Lead Plaintiffs lacked statutory standing to pursue their misrepresentation claims against the NYSE. However, the district court‘s reasons for dismissing
That is not what Nortel Networks held. In Nortel Networks, the plaintiffs had purchased stock in JDS Uniphase. Plaintiffs claimed that a different company, Nortel Networks, knowingly made falsely optimistic public statements about its own financial prospects. On the basis of a business relationship between JDS Uniphase and Nortel Networks, the plaintiffs claimed that their purchase price for JDS Uniphase stock had been inflated by Nortel Networks’ false statements about itself. In the particular circumstances of the case, the connection between Nortel Networks’ false statements about itself and the plaintiff‘s purchase of JDS Uniphase stock was too remote to sustain an action under Rule 10b-5.
In short, the district court incorrectly read Nortel Networks to mean that an action under
We express no opinion on the other grounds for dismissal that the NYSE raised below because we lack proper briefing on those issues. On remand, however, the district court is free to entertain such arguments. Specifically, we point the parties’ and the district court‘s attention to the arguments regarding whether the NYSE enjoys SRO immunity for its alleged misrepresentations. See, e.g., Weissman v. Nat‘l Ass‘n of Sec. Dealers, Inc., 468 F.3d 1306 (11th Cir. 2006), reh‘g en banc granted, 481 F.3d 1295 (11th Cir. 2007). But see DL Capital Group, 409 F.3d 93; Weissman, 468 F.3d at 1313 (Tjoflat, J., dissenting). Likewise, the district court may consider whether Lead Plaintiffs have pled that reliance on the alleged misrepresentations caused their loss. Without a clear understanding as to what Lead Plaintiffs’ theory of reliance is – whether they are asserting direct reliance on the alleged misrepresentations or are asking the Court to presume reliance based on a doctrine such as the fraud-on-the-market theory – we think it is inappropriate at this time for us to decide whether those pleadings are adequate to state a claim. We note, however, that Lead Plaintiffs’ Rule 10b-5 claims do not appear to be of the nature where the fraud-on-the-market theory would apply, where the misrepresentation itself affects the market price of the security purchased. See Basic Inc. v. Levinson, 485 U.S. 224, 241-42 (1988).
For the foregoing reasons, we affirm the judgment of the district court in part, vacate the judgment in part and remand for proceedings consistent with this opinion.