Confidential Sources

Confidential sources have become a hot topic in securities class actions. The Third Circuit and Ninth Circuit (see here and here) have issued recent decisions discussing the use of statements from confidential sources to help meet the PSLRA’s heightened pleading standards. The New York Law Journal has an informative article (via – free regist. req’d) that summarizes these decisions and talks generally about the development of the case law in this area.

Quote of note: “[A] majority of courts addressing this issue have permitted the use of confidential sources, at least under certain circumstances. However, a review of recent decisions suggests that the courts are now closely scrutinizing the use of confidential sources in securities fraud cases and are becoming more vigilant in probing whether there is in fact such a source, whether that source would have been in a position to acquire first-hand knowledge of the matters attributed to it, and whether the information attributed to the source is corroborated by other, independent particularized facts pled in the complaint.”

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