In a private action for damages under the Securities Exchange Act, what must investors prove?

In a private action for damages under the Securities Exchange Act, investors must demonstrate reliance on the fraudulent act and show that it directly resulted in economic losses. This requirement is rooted in the principles of securities fraud, which focus on the relationship between the misrepresentation or omission and the investor's decision to buy or sell a security. Investors need to establish that they relied on the fraudulent statement or omission when making their investment decisions, and that this reliance caused them to suffer financial harm.

For example, if an investor purchased stock based on false information, and later suffered losses when the truth was revealed, they would need to prove both their reliance on that false information and the resultant economic damages. This linkage is crucial because, without showing that their reliance on the fraud caused their losses, they would not satisfy the legal standards necessary for a successful claim.

The other options do not accurately reflect the legal requirements for a successful private action under the Securities Exchange Act. While the stock being publicly traded may be relevant in certain contexts, it is not a definitive requirement for proving damages. Holding shares for a specific period, or having knowledge of insider information, does not establish the necessary connection between the fraudulent act and the financial losses incurred by the investor.