Antifraud Rule [Securities] Law and Legal Definition

Antifraud Rule is one of the most important rules promulgated by the U.S. Securities and Exchange Commission that prohibits deceptive or manipulative practices like material misrepresentations or omissions in the buying or selling of securities. The rule codified at 17 CFR 240.10b-5 says:

§ 240.10b-5 Employment of manipulative and deceptive devices.

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,

(a) To employ any device, scheme, or artifice to defraud,

(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or

(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,

in connection with the purchase or sale of any security.

This is also known as Rule 10b-5.