So the big securities news this week was the “hoax” bid to buy Avon Products.

Apparently, a hoaxster filed a fake offer to take over Avon Products with EDGAR, the SEC’s online database.

The filing caused a brief spike in the price of Avon shares.  (As of the drafting of this blog post, Avon shares were still trading slightly higher than they were before the offer was filed).  The details of the filing are as yet unknown, but presumably, whoever filed the release profited off the spike.

DealBook points out that this kind of incident may prompt the SEC to conduct some kind of preliminary vetting of filings with EDGAR, but one of the more interesting questions – as Matt Levine argues – concerns the definition of “materiality” for securities laws purposes.  Ordinarily, false statements (such as a false representation concerning a takeover bid) are only prohibited to the extent they are “material” to a “reasonable” investors.  Most human investors would likely have recognized the dubiousness of the offer (it named a law firm that doesn’t exist, and misspelled the name of the offeror); computerized traders, however, did not.  (And perhaps humans then followed on, seeking to capitalize on the chaos caused by computers.)  Indeed, a previous spike occurred when Tesla filed an April Fool’s Day press release announcing the release of a (fictional) new product.

Margaret Sachs has previously recognized that courts tend to vary their notion of the “reasonable investor” given the context in which a fraud occurs.  Courts tend to assume a very high degree of sophistication for fraud on the market claims concerning widely-traded securities, but when it comes to Ponzi schemes and other frauds aimed at vulnerable populations, courts lower the bar.

Which of course raises the question whether we need a whole new definition of materiality aimed at the computers who do the majority of today’s trading.  Tom C.W. Lin has recently published an article on precisely this topic, arguing, among other things, that computerized trading and algorithmic investors should be considered as a type of reasonable investor at whom regulations are aimed.