In today's society, with the advent of the "information superhighway," federal and state legislation and regulations, as well as information regarding industry trends, are easily accessed. A reasonable investor is presumed to have information available in the public domain, and therefore Whirlpool is imputed with constructive knowledge of this information. 1
The integrity of securities markets in the United States has long been enhanced by a regulatory system that mandates disclosure of material information by the large number of public companies that offer their securities for sale to the investing public. However, the market also has available to it a tremendous amount of information about such companies from non-company, or third-party, sources, including business news periodicals, newspapers, and investment analyst reports. The recent explosive growth in the availability of information over the Internet has led to, for the first time in the history of securities law, the widespread availability of a veritable treasure trove of public company-related information. Over the last few decades, courts in the United States have found that, in certain circumstances under a theory known as "truth-on-the-market," third-party sources of information may help absolve a company of securities law liability arising from misstatements made by the company or outright failures by such companies to provide material information. This Article sets forth the legal framework under which the truth-on-the-market doctrine has developed, describes some of the circumstances under which courts have addressed the doctrine, and examines how much "truth" is represented by such third-party, company-related information now widely available on the Internet's World Wide Web.
A. Issuer-Related Information Available on the Internet
Public companies have a duty to disclose information to the marketplace under the statutes, rules, and regulations of the U.S. Securities and Exchange Commission (SEC). These information vehicles include annual, quarterly, and current reports on Forms 10-K, I O-Q, and 8-K, respectively, and the various forms for registration statements,2 which are now available on the Internet via the SEC's EDGAR database.3 In these reports, issuers supply investors with historic financial information4 and also disclose, among other things, "trends, demands, commitments, events or uncertainties that are both presently known to management and reasonably likely to have material effects on the registrant's financial condition or results of operation."5
Issuer-related information on the Internet's World Wide Web includes: (i) company home pages with factual product information, marketing materials, financial information, press releases, and links to external, third-party sources of information;6 and (ii) thirdparty Websites7 that make available, either on the third-party site itself or through hyperlink, specific company news, generally relevant business and industry news, stock prices, financial information, analyst estimates and reports, SEC filings, regulatory agency and self-regulatory organization information,8 and extremely active message boards and chatrooms with postings by largely anonymous market participants.9
Approximately ninety-two million people in the United States over the age of sixteen presently have access to these sources of information on the Internet. I() An earlier version of a well-respected survey demonstrated that in 1998, twenty-two million people utilized the Web to access financial information to make investment decisions.11 Additionally, twelve million investors actually used the Web to purchase their investments.12
B. Efficient Market Integration of Information Disclosure
To understand why certain information is critically important to an assessment of securities law liability, it is first necessary to explain the way some commentators have described the effect such information has on particular aspects of that market, especially the setting of security prices. …