Naked short cases have been slaughtered in federal courts,” Aguirre said. “Now there’s a crack in the door. But plaintiff lawyers will have to do a lot of creative designing in state courts to open it further.
While that regulation makes it illegal to use naked short sales to manipulate a security, cases against the practice haven’t fared well in federal court, attorneys said. That’s in part because the Supreme Court has required plaintiffs in federal court to cite specific statutes that they believe have been violated, Wharton’s Zaring said.
Under the Supreme Court’s latest ruling, plaintiff attorneys would still have to bring suits in jurisdictions with applicable anti-fraud or securities laws -- which also include California and Georgia -- and avoid conflicts with federal statutes, Aguirre said.
