I have written about the evolving seigneurial view in American politics and law--that common people ought to be able to act as though the world has been made a place safe for them, in matters of finance, food, drugs, toys, consumer prodcuts, and so on.

On Monday, the Third Circuit Court of Appeals, based in Philadelphia, provided a slight check to that idea. According to the court, the case Malack v. BDO Seidman turned on the following view of the investor’s situation: “(1) ‘the existence of the security in the marketplace resulted from the successful perpetration of a fraud on the investment community’ and (2) that [he (correction by RD)] ‘purchased in reliance on the market.’ Critical to the theory’s coherency is the assumption that it is reasonable for an investor to rely “on [a] [security’s] availability on the market as an indication of [its] apparent genuineness[.]”

But this is not reasonable, said the court: “‘Common sense,’ to the extent Malack invokes it as support, calls for rejecting the proposition that a security’s availability on the market is an indication of its genuineness and is worthy of an investor’s reliance. For a security’s availability on the market to be an indication of its genuineness there must be some entity involved in the process of taking the security to market that acts as a bulwark against fraud. Yet the entities most commonly involved in bringing a security to market do not imbue the security with any guarantee against fraud.” Well said. Now if only the Court were as reasonable in matters of grammatical gender.

The most famous description of the seigneurial view, of course, was Alexis de Tocqueville: “Above this race of men stands an immense and tutelary power, which takes upon itself alone to secure their gratifications and to watch over their fate. That power is absolute, minute, regular, provident, and mild. It would be like the authority of a parent if, like that authority, its object was to prepare men for manhood; but it seeks, on the contrary, to keep them in perpetual childhood:”


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