Currently, circuit courts are split over whether Rule 13b2–2 contains a scienter requirement. Whereas the Second and Eighth Circuits have found no scienter requirement in Rule 13b2–2, the Ninth Circuit has held the opposite. This debate offers an opportunity to reevaluate the costs and benefits of these provisions. These provisions protect the accuracy and breadth of corporate financial records. Because investors rely on the disclosure of corporate information, inaccurate and incomplete financial records threaten the efficiency of capital markets. Absent a scienter requirement, however, these provisions could impose liability on good-faith actors, potentially increasing the cost of compliance as companies take excessive action to avoid liability.
Thus, the circuit split raises a question: Without scienter, do the costs of § 13(b) and Rule 13b2–2 exceed their benefits? This Note argues that, while § 13(b) and Rule 13b2–2 do not require scienter as a matter of law, Congress can better align the costs and benefits of these provisions by adding a due diligence defense.
