West v. Prudential Securities, Inc.

Broker Hofman privately and falsely told 11 customers that Jefferson Savings Bancorp would soon be acquired; based on that lie, the district court certified a securities-fraud class consisting of everyone who bought Jefferson stock during the period Hofman was lying, applying the fraud-on-the-market theory. Prudential Securities (defendant), Hofman's employer, took an interlocutory appeal of the class certification.

Whether the fraud-on-the-market theory, which presumes investor reliance on public misstatements reflected in a security's market price, extends to a private, nonpublic misstatement made to a limited group of investors.