Spongetech Delivery Systems Inc (fka SPNGQ)

[Stock Stallion]

The U.S. securities laws are complex and provide numerous grounds to assert claims against companies and related parties. By far the most commonly relied upon basis for securities law claims is the general anti-fraud provision contained in Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 adopted thereunder. The basic elements of a Rule 10b-5 claim are:

a claim by a purchaser of securities
on behalf of a class of purchasers
alleging that the issuer through a misstatement or omission of a material fact
intentionally or recklessly caused harm which affected the price of the shares.
No bright line test exists for determining what constitutes a material misstatement or omission. Rather, the standard is whether there is a substantial likelihood that a reasonable shareholder would consider the misstatement or omission important in making an investment decision. The highly fact-sensitive, subjective nature of this key concept directly contributes to issuers' willingness to settle what they might consider to be weak claims.

It is important to note that Rule 10b-5 claims can be, and often are, made against not only the issuer, but also against its officers and directors, any person who controls the issuer and the issuer's