Deutschman v. Beneficial Corp

841 F.2d 502 (3d Cir. 1988)


  • D is an insurance division that suffered significant losses in profit, which in turn would adversely impact their stock.
  • P was an option trader who claimed D’s CEO and CFO made misrepresentations in effort to cover up said losses.
  • P brought a 10b-5 lawsuit personally and on the behalf of other option traders who had purchased options within the same timeframe.
  • D argued that option traders had no standing to sue because option traders weren’t covered by rule 10b-5.


  • Whether options traders are covered by 10b-5.


  • Yes, options traders are covered.
    • 10b-5 doesn’t have a specific requirement for Plaintiff standing to sue.
  • This Plaintiff was clearly the victim of false and misleading misrepresentations and thus has standing to sue.  The statute makes no mention that one must own the stock in order to be eligible to sue.
    • From a policy perspective, there is no reason to allow fraudulent statements where only non-stockholders are harmed.  The rule applied regardless of who’s negatively impacted.
  • It’s should be noted that this court made an extra effort to apply this case’s outcome to “affirmative misrepresentations.”              This means that if the company had simply said nothing about their financial situation, there would have been no ability to sue.

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