First Page
787
Abstract
Over the last twenty years, the rise of social media has dramatically changed how the world communicates. One such transformation is the use of social media platforms to disseminate information regarding the financial markets, aiding investors in their trading decisions. While increased access to financial information has democratized retail consumers’ access to capital markets, it has also introduced a level of instability. Furthermore, social media enables individuals with mass followings to disseminate their thoughts, opinions, or information, potentially influencing investors’ behavior and creating an environment conducive to securities fraud. Since its promulgation, the United States Securities and Exchange Commission (SEC) has relied upon SEC Rule 10b-5 to investigate securities fraud claims. But, despite its historical significance, the Rule has not been substantively updated to address the evolving nature of securities fraud in the digital age. This Note reviews the timeline of Elon Musk’s acquisition of X (formerly Twitter), highlighting the correlation between his public statements via his personal Twitter account and the company’s share prices. The analysis serves as a case study illustrating how individuals with large public followings can exploit social media for market manipulation. Additionally, this Note explores the shortcomings of Rule 10b-5, specifically in terms of the scienter requirement, in bringing securities fraud actions involving social media and argues that liability should be extended under a standard of bad faith
Recommended Citation
John Madigan,
Reconsidering Scienter With Social Media: Adapting Rule 10b-5 in the Age of Elon Musk Tweets,
18 Brook. J. Corp. Fin. & Com. L.
787
(2024).
Available at:
https://brooklynworks.brooklaw.edu/bjcfcl/vol18/iss2/10