A company included in its reports to the stock exchange false details in connection with one of the many projects under its management. This project was classified, in the company's reports, as a 'not very substantial' project and the amount of investment in it was negligible in relation to the company's capital.
The Court accepted the motion to approve a class claim against the company and held that it was a fraud due to the information constituting as material information. The prohibition on including a false detail in a report to the stock exchange is not all encompassing and does not include any false detail. Rather, its reach is reviewed based on the materiality of the false detail. The question of the nature of the false detail will be examined based on the possibility that the existence or absence of that detail will lead to misleading the reasonable investor. Here, it is a company that included in its reports a representation according to which the municipality allocated additional land for the benefit of the construction-evacuation project managed by the company, while in practice the municipality did not allocate the land, which it did not even own. The fraudulent report led to a 50% increase in the company share price and the disclosure of the fraud led to a steep decline in share value. Hence, it is evident that although from the company's point of view this is but one small project among many, when assessing of the possibility of misleading the reasonable investor this is a material detail.