FOR THE NINTH CIRCUITIn re SILICON GRAPHICS INC.SECURITIES LITIGATION.EDMUND J. JANAS,Plaintiff-Appellant,No. 97-16204v.D.C. No.EDWARD R. McCRACKEN; MICHAELCV-96-0393-FMSRAMSAY; ROBERT K. BURGESS;THOMAS J. OSWALD; TERUYASUSEKIMOTO; FOREST BASKETT;STEPHEN GOGGIANO; WILLIAM M.KELLY; LUCILLE SHAPIRO; SILICONGRAPHICS, INC.,Defendants-Appellees.DEANNA BRODY; ANDREA S.DONALD; ISRAEL BUCK; RUTH BUCK;DENISE STRUTHERS; THOMAS G.No. 97-16240DI CICCO IRA; STEVEN B. EWALL;ROSALYN GOLAINE; JERRY KRIM;D.C. No.MARY ANNE BEKE; HERMANCV-96-0393-FMSGROSSMAN; SAMUEL J. REINER;OPINIONDENNIS LUCAS,Plaintiffs-Appellants,v.7203EDWARD R. McCRACKEN; MICHAELRAMSAY; ROBERT K. BURGESS;THOMAS J. OSWALD; TERUYASUSEKIMOTO; FOREST BASKETT; STEPHEN GOGGIANO; WILLIAM M. KELLY; LUCILLE SHAPIRO; SILICONGRAPHICS, INC.,Defendants-Appellees.

Appeals from the United States District Courtfor the Northern District of CaliforniaFern M. Smith, District Judge, PresidingArgued and SubmittedJune 11, 1998--San Francisco, CaliforniaFiled July 2, 1999Before: James R. Browning and Joseph T. Sneed,Circuit Judges, and John S. Rhoades,1 District Judge.Opinion by Judge Sneed; Partial Concurrence andPartial Dissent by Judge Browning

______________________COUNSEL Paul F. Bennett, Gold Bennett & Cera, San Francisco, Cali-fornia, for plaintiff-appellant Edmund J. Janas; Leonard B.Simon, Milberg Weiss Bershad Hynes & Lerach, San Diego,California, for plaintiffs-appellants Deanna Brody, et al.Richard H. Walker, General Counsel, Securities andExchange Commission, Washington, D.C., for amicus curiaeSecurities and Exchange Commission.Bruce G. Vanyo, Wilson Sonsini Goodrich & Rosati, PaloAlto, California, for the defendants-appellees.

_____________________________OPINION SNEED, Circuit Judge:This case requires us to interpret the Private Securities Liti-gation Reform Act of 1995 ("PSLRA").2 Congress enactedthe PSLRA to deter opportunistic private plaintiffs from filingabusive securities fraud claims, in part, by raising the plead-ing standards for private securities fraud plaintiffs. See, e.g.,H.R. REP. CONF. NO. 104-369, at 32-41 (1995); see also 15U.S.C. S 78u-4(b)(1), (2) (1997). In doing so, Congress gener-ated a flood of litigation and commentary regarding theproper interpretation of these standards. Much of this litiga-tion deals specifically with the pleading issue now before us,i.e., what must a plaintiff allege in order to satisfy the require-ment that he state facts giving rise to a "strong inference" offraudulent intent? See 15 U.S.C. S 78u-4(b)(2) (requiring thatthe complaint "state with particularity facts giving rise to astrong inference that the defendant acted with the requiredstate of mind").Due to the nature of this litigation, we shall depart some-what from the customary form of opinions of this Court bydiscussing generally what we hold to be the pleading standardunder the PSLRA. Thereafter, we will set forth the facts ofthis case and then apply that standard to those facts.I.THE PSLRA PLEADING STANDARD:THIS COURT'S INTERPRETATIONWe hold that a private securities plaintiff proceeding underthe PSLRA must plead, in great detail, facts that constitutecircumstantial evidence of deliberately reckless or consciousmisconduct. Our holding rests, in part, on our conclusion thatCongress intended to elevate the pleading requirement abovethe Second Circuit standard requiring plaintiffs merely to pro-vide facts showing simple recklessness or a motive to commitfraud and opportunity to do so. We hold that although factsshowing mere recklessness or a motive to commit fraud andopportunity to do so may provide some reasonable inferenceof intent, they are not sufficient to establish a strong inferenceof intent. In order to show a strong inference of intent, plain-tiffs must state facts that come closer to demonstrating intent,as opposed to mere recklessness. Accordingly, we hold that aheightened form of recklessness, i.e., deliberate or consciousrecklessness, at a minimum, is required to establish a stronginference of intent. We think that our holding represents thebest way to reconcile Congress' express adoption of the Sec-ond Circuit's so-called "strong inference standard" with itsexpress refusal to codify that circuit's case law interpretingthe standard. However, we are mindful that not all courtsshare our view.A.Other InterpretationsThere is widespread disagreement among courts as to theproper interpretation of the PSLRA's heightened pleadingrequirement. See 15 U.S.C. S 78u-4(b)(1), (2). To date, theSecond Circuit is the only other court of appeals to addressthe issue squarely. See Press v. Chemical Inv. Serv. Corp.,No. 98-7123, 1999 U.S. App. LEXIS 1494 (2nd Cir. Feb. 4,1999) (holding that plaintiff may meet the "strong inference"standard by setting forth facts either (1) showing motive tocommit fraud and an opportunity to do so, or (2) constitutingcircumstantial evidence of either reckless or conscious mis-conduct). Of the district courts considering the issue, roughlysixty percent (some twenty cases) have followed the SecondCircuit, while the others have interpreted the PSLRA asadopting some higher standard.Generally, the district courts have taken three differentapproaches: (1) apply the Second Circuit standard requiringplaintiffs to plead mere motive and opportunity or reckless-ness, see e.g., Epstein v. Itron Inc. , 993 F. Supp. 1314 (E.D.Wash. 1998); Robertson v. Strassner, 32 F. Supp. 2d 443, 447(S.D. Tex. 1998); In re Wellcare Management Group, Inc.Sec. Litig., 964 F. Supp. 632 (N.D.N.Y. 1997); (2) apply aheightened Second Circuit standard rejecting motive andopportunity, but accepting recklessness, see e.g., Myles v.MidCom Communications, Inc., No. C96-614D (W.D. Wash.Nov. 19, 1996); Queen Uno Ltd. Partnership v. Coeurd'Alene Mines Corp., No. CIV 97-WY-1431-CB, 1998 WL195299 (D. Colo. Apr. 13, 1998); or (3) reject the Second Cir-cuit standard and accept only heightened recklessness or con-scious conduct--akin to "conscious" or "deliberate"recklessness, see e.g., Voit v. Wonderware Corp., 977 F.Supp. 363 (E.D. Pa. 1997); Powers v. Eichen, 977 F. Supp.1031 (S.D. Cal. 1997); Friedberg v. Discreet Logic Inc., 959F. Supp 42 (D. Mass. 1997). For further discussion of thecases, see, e.g., Richard H. Walker and J. Gordon Seymour,Recent Judicial and Legislative Developments Affecting thePrivate Securities Fraud Class Action, 40 ARIZ. L. REV. 1003(1998).We embrace the third approach because we think it, unlikethe second, properly relates the pleading standard to theunderlying scienter of fraudulent intent. By reminding trialcourts that Congress intended to bar those complaints that failto raise a strong inference of intent, the deliberate reckless-ness standard best serves the PSLRA's purpose. The PSLRAtext and legislative history support our conclusion.B.The Bases for Our InterpretationTo determine the proper pleading standard under thePSLRA, we turn first to the text of the statute. If the languageis plain and its meaning clear, that is the end of our inquiry.See Northwest Forest Resource v. Glickman, 82 F.3d 825, 831(9th Cir. 1996).1. The Plain Language of the PSLRA[1] The PSLRA provides, in pertinent part:       (b) Requirements for securities fraud actions       . . . (2) Required state of mind        In any private action arising under this       chapter in which the plaintiff may recover       money damages only on proof that the       defendant acted with a particular state of       mind, the complaint shall, with respect to       each act or omission alleged to violate this       chapter, state with particularity facts giving       rise to a strong inference that the defendant       acted with the required state of mind.15 U.S.C. S 78u-4(b)(2) (bold emphasis in original; underlineemphasis added). Under this provision, the mental staterequired for securities fraud liability, i.e., scienter, is distinctfrom the level of pleading required to infer that mental state,i.e., the required quantum of proof. Therefore, we must maketwo separate determinations: (1) what is the required state ofmind; and (2) what constitutes a strong inference of that stateof mind.       a. Required state of mind[2] The "required state of mind " in S 78u-4(b)(2) refers tothe scienter requirement applicable to the underlying securi-ties fraud claim brought by the plaintiff. In this case, Brodybrought her securities fraud action under S 10(b) of the Secur-ities Exchange Act of 1934 and Rule 10b-5, which establishesa private cause of action for securities fraud. See 17 C.F.R.S 240.10b-5.[3] The required state of mind underS 10(b) is intent. SeeErnst & Ernst v. Hochfelder, 
425 U.S. 185
, 194 n.12, 96S. Ct. 1375, 1381 n.12, 47 L. Ed. 2d 668 (1976) (holding thatscienter under S 10(b) "refers to a mental state embracingintent to deceive, manipulate, or defraud"). Section 10(b)makes unlawful the use of "any manipulative or deceptivedevice or contrivance" in contravention of SEC Rules. See 15U.S.C. S 78j(b). According to the Supreme Court, "[t]hewords `manipulative and deceptive' used in conjunction with`device or contrivance' strongly suggest thatS 10(b) wasintended to proscribe knowing or intentional misconduct."Ernst at 197, 96 S. Ct. at 1383, 47 L. Ed. 2d 668 (citationsomitted) (emphasis added).[4] Although the Court decided thatS 10(b) scienterrequires intent, it did not set forth the quantum of proofrequired to show such intent. The Court left open the questionof "whether, in some circumstances, reckless behavior is suf-ficient for civil liability under S 10(b) and Rule 10b-5." Id. at194 n.12, 96 S. Ct. at 1381 n.12, 47 L. Ed. 2d 668. Thus,although the Court determined that intent is required underS 10(b), it reserved the question of whether recklessness alonecould constitute sufficient circumstantial evidence of intent.[5] In Provenz v. Miller, 102 F.3d 1478, 1490 (9th Cir.1996), we answered that question in the affirmative, holdingthat a plaintiff can establish scienter with circumstantial evi-dence and that, in some cases, recklessness is "sufficient toraise a reasonable inference of scienter." In defining the sortof reckless behavior that can give rise to liability underS 10(b) and Rule 10b-5, this Court stated:       To establish scienter, plaintiffs must show that       defendants had a mental state embracing an intent to       deceive, manipulate, or defraud. Plaintiffs can estab-       lish scienter by proving either actual knowledge or       recklessness . . . . [R]eckless conduct involves not       merely simple, or even inexcusable negligence, but       an extreme departure from the standards of ordinary       care, and which presents a danger of misleading buy-       ers or sellers that is either known to the defendant or       is so obvious that the actor must have been aware of       it.Provenz, 102 F.3d at 1490 (citations and internal quotationmarks omitted).3 Although Provenz set forth the pre-PSLRArule that, in some cases, reckless conduct can create a reason-able inference of intent, it did not alter the more fundamentalprinciple that the underlying scienter required in securitiesfraud cases is fraudulent intent. See Hochfelder , 
425 U.S. 185
,194 n.12, 96 S. Ct. 1375, 1381 n.12, 47 L. Ed. 2d 668. In sum,regardless of our pre-PSLRA holding that recklessness onceconstituted sufficient circumstantial evidence of the requiredintent, the scienter or "required state of mind " for S 10(b) andRule 10b-5 actions has always been and continues to be"fraudulent intent." Therefore, we read the PSLRA languagethat the facts must give rise to a "strong inference . . . [of] therequired state of mind" to mean that the evidence must createa strong inference of fraudulent intent.We now turn to our second inquiry, i.e., what constitutes astrong inference of fraudulent intent?       b. Strong inference of fraudulent intentAgain, we begin with the language of the statute becauseif the language is clear, we need inquire no further. SeeGlickman, 82 F.3d at 830-31. In this case, the statute is silentas to the central issue: the text of the PSLRA does not statewhether motive and opportunity or simple recklessness aresufficient to raise a "strong inference" of intent. Although theplain text of the PSLRA leaves it open for us to consider reck-lessness and motive and opportunity as evidence of intent, itdoes not indicate whether they alone are enough to establisha "strong inference" of intent. In the absence of a clear com-mand in the text, we turn to the legislative history for guid-ance. See id.2. The Legislative History of the PSLRA[6] When examining the legislative history, we first look tothe conference report because, apart from the statute itself, itis the most reliable evidence of congressional intent. See id.,82 F.3d at 835. In this case, the conference report suggestsboth that Congress generally intended to raise the pleadingstandards to eliminate abusive securities litigation and that itspecifically intended to raise the pleading standard above thatin the Second Circuit.It is clear from the conference report that Congress soughtto reduce the volume of abusive federal securities litigation byerecting procedural barriers to prevent plaintiffs from assert-ing baseless securities fraud claims. In a joint statement, man-agers from the House and Senate declared that "Congress hasbeen prompted by significant evidence of abuse in privatesecurities lawsuits to enact reforms to protect investors andmaintain confidence in our capital markets." H.R. CONF. REP.104-369, at 31. The managers observed that plaintiffs rou-tinely were filing lawsuits "against issuers of securities andothers whenever there [was] a significant change in an issu-er's stock price, without regard to any underlying culpabilityof the issuer, and with only faint hope that the discovery pro-cess might lead eventually to some plausible cause ofaction[.]" Id. They recognized that plaintiffs, by targeting"deep pocket defendants," could misuse the discovery process"to impose costs so burdensome that it [was ] often economi-cal for the victimized party to settle[.]" Id. In general, the con-ference report makes it clear that Congress designed thePSLRA to deter non-meritorious lawsuits by creating proce-dural barriers such as heightened pleading standards. Id. at 41.[7] It is also clear from the legislative history that Congresssought more specifically to raise the pleading standard abovethat in the Second Circuit. First, Congress declined to enactan amendment that would have adopted the Second Circuitrule. It is true that during the floor debate of its version of thePSLRA, the Senate tentatively adopted the Specter Amend-ment which codified the Second Circuit's two-pronged"motive and opportunity" and "recklessness " test. See 141CONG. REC. S9,170 (daily ed. June 27, 1995). However, thejoint conference committee--consisting of House and Senatemanagers charged with reconciling differences between theHouse and Senate bills--declined to incorporate the SpecterAmendment in the final version of the PSLRA. See H.R.CONF. REP. 104-369, at 41. In doing so, they implicitlyrejected the Second Circuit's two-pronged test. See Gulf OilCorp. v. Copp Paving Co., 
419 U.S. 186, 200
, 95 S. Ct. 392,401, 42 L. Ed. 2d 378 (1974) (holding that where the confer-ence committee has expressly declined to adopt proposed stat-utory language, its action "strongly militates against ajudgment that Congress intended [the] result that it expresslydeclined to enact").[8] Second, the joint committee expressly rejected the Sec-ond Circuit's two prong test in favor of a more stringent stan-dard. The joint committee stated:       The Conference Committee language is based in part       on the pleading standard of the Second Circuit . . ..       Regarded as the most stringent pleading standard,       the Second Circuit requirement is that the plaintiff       state facts with particularity, and that these facts, in       turn, must give rise to a "strong inference" of the       defendant's fraudulent intent. Because the Confer-       ence Committee intends to strengthen existing plead-       ing requirements, it does not intend to codify the       Second Circuit's case law interpreting this pleading       standard.23       23 For this reason, the Conference Report chose not to include in       the pleading standard certain language relating to motive,       opportunity, or recklessness.H.R. CONF. REP. 104-369, at 41 n. 23 (emphasis added). Seealso S. REP. 104-98, at 15 ("The Committee does not intendto codify the Second Circuit's caselaw interpreting[the stronginference] pleading standard, although courts may find thisbody of law instructive."). According to this statement,although Congress derived the PSLRA "strong inference" lan-guage from the Second Circuit, it rejected the less stringentSecond Circuit case law interpreting that "strong inference"language. To repeat, the conference committee purposelychose not to include in its pleading standard language derivedfrom Second Circuit case law relating to motive, opportunityor recklessness.Thus, Congress did not codify the Second Circuit case law.In the words of the joint committee, it sought to "strengthenexisting pleading requirements." See H.R. CONF. REP. 104-369, at 41. The Second Circuit case law setting forth its two-prong test existed at the time the PSLRA was passed. If theSecond Circuit case law existed and Congress sought to raisethe standard above all existing requirements, it follows thatCongress sought to raise the standard above that in the SecondCircuit. Otherwise, Congress would not have expressed itsintention to raise existing standards and instead, would haveadopted outright the Second Circuit standard.We recognize that the PSLRA's "strong inference " lan-guage is taken directly from the Second Circuit. This is notconclusive, however. A close reading of the legislative historyleads us to conclude that Congress adopted the Second Cir-cuit's "strong inference" language only because it was faciallymore stringent than the "reasonable inference " standard inother circuits, see, e.g., Provenz, 102 F.3d at 1490, and notbecause Congress intended to adopt the Second Circuit'sunderlying two-prong test. After all, Congress expresslyrejected the Second Circuit case law interpreting the "stronginference" standard because it was not as stringent as the caselaw in other circuits.4 To repeat, Congress intended for thePSLRA to raise the pleading standard even beyond the moststringent existing standard.Congress further provided quite strong evidence of itsintent to go beyond the Second Circuit standard when it over-rode President Clinton's veto of the PSLRA. In his veto mes-sage to Congress, President Clinton expressed concern thatCongress had elevated the pleading standard above thatrequired in the Second Circuit. President Clinton stated:       I believe that the pleading requirements of the Con-       ference Report with regard to a defendant's state of       mind impose an unacceptable procedural hurdle to       meritorious claims being heard in Federal courts. I       am prepared to support the high pleading standards       of the U.S. Court of Appeals for the Second Circuit       --the highest pleading standard of any Federal cir-       cuit court. But the conferees make crystal clear in the       Statement of the Managers their intent to raise the       standard even beyond that level. I am not prepared       to accept that.141 CONG. REC. H15,214 (daily ed. Dec. 10, 1995). Notwith-standing the President's concerns, Congress overrode hisveto, and the PSLRA became law. In doing so, Congress pro-vided further evidence of its intent to elevate the pleadingstandard to a level beyond that in the Second Circuit.[9] In sum, the legislative history supports our conclusionthat the PSLRA pleading standard is higher than the standardof the Second Circuit. We find that because the joint commit-tee expressly rejected the "motive and opportunity" and"recklessness" tests when raising the standard, Congress musthave intended a standard that lies beyond mere recklessness.Had Congress merely sought to adopt the Second Circuit stan-dard, it easily could have done so. It did not do so. Instead,Congress adopted a standard more stringent than the SecondCircuit standard. It follows that plaintiffs proceeding underthe PSLRA can no longer aver intent in general terms of mere"motive and opportunity" or "recklessness, " but rather, muststate specific facts indicating no less than a degree of reck-lessness that strongly suggests actual intent. Thus, we agreewith the district court that the PSLRA requires plaintiffs toplead, at a minimum, particular facts demonstrating deliberateor conscious recklessness. We believe that this "deliberaterecklessness" standard best reconciles Congress' adoption ofthe Second Circuit's so-called "strong inference standard"with its express refusal to codify that circuit's two-prong"motive and opportunity" and "recklessness " test.Having determined that the PSLRA requires plaintiffs toplead deliberate recklessness, we must determine whether theplaintiffs in this case satisfied that requirement. Therefore, wenow turn to the facts and procedural background of the casebefore us.II.FACTS AND PROCEDURAL BACKGROUNDDeanna Brody ("Brody") filed a securities fraud classaction in the United States District Court for the NorthernDistrict of California alleging that Silicon Graphics, Inc.("SGI") and six of its top officers ("officers")5 made a seriesof misleading statements to inflate the value of SGI's stockwhile they engaged in "massive" insider trading. The districtcourt dismissed Brody's complaint for failure both: (1) tostate a claim under Federal Rule of Civil Procedure 12(b)(6);and (2) to satisfy the PSLRA pleading requirements. The dis-trict court also granted summary judgment to four individualofficers on the issue of misrepresentation. Brody now appeals,arguing that dismissal was improper because her complaintincluded facts sufficient to establish a strong inference offraudulent intent and that summary judgment was improper inthe absence of discovery. We disagree.Based on the same events, Edmund J. Janas ("Janas") fileda shareholders derivative suit claiming that SGI's officersbreached their fiduciary duties to SGI, were grossly negligentin managing the company, and engaged in improper insidertrading. Again, the district court dismissed the complaint,holding that Janas failed to allege a pre-suit demand on SGI'sdirectors as required by Federal Rule of Civil Procedure 23.1.Janas now appeals. On appeal, he argues that the district courtabused its discretion when it concluded that it would not havebeen futile for Janas to make a demand on the directors. Janasalso claims that the district court improperly denied him leaveto amend. Again, we disagree.We have jurisdiction pursuant to 28 U.S.C. S 1291 andaffirm. We hold that although Brody has stated facts givingrise to some inference of fraudulent intent, her factual allega-tions are insufficient to create a strong inference of intent, i.e.,that the officers acted with no less than deliberate reckless-ness. We also conclude that the uncontested affidavits offeredby the individual officers were adequate to support summaryjudgment in their favor. With regard to Janas's derivative suit,we hold that he was not excused from making a pre-suitdemand upon the directors and that he could not haveamended his complaint to show that such a demand wouldhave been futile. As a result, we hold that dismissal with prej-udice was appropriate.Brody's First Amended Complaint asserts6  that SGI is aDelaware Corporation that manufactures desktop graphicworkstations and software. In July 1995, SGI reported 45%revenue growth for Fiscal Year 1995 ("FY95") and projectedsimilar growth for Fiscal Year 1996 ("FY96"). At the sametime, SGI announced plans to produce a line of graphic designcomputers called the "Indigo2 Impact Workstation"("Indigo2") which it developed to compete with a new line ofHewlett-Packard workstations. SGI planned to ship the Indi-go2 in volume by September 30, 1995, the end of the firstquarter of FY96, and an upgraded version by January 1, 1996.SGI assured investors that Indigo2 would help sustain a 40%growth rate and exceed $1 billion in sales in FY96. SGI's pro-jections drove its stock price to an all-time high of $44-7/8 onAugust 21, 1995.By mid-September 1995, Brody further asserts, SGI beganencountering quality control problems with a primary Indigo2component, the Toshiba ASIC chip. Toshiba sent SGI a largenumber of defective chips, causing SGI to fall behind its pro-duction schedule. Brody alleges that the officers learnedimmediately of the defective chips through SGI internalreports, but continued to represent to investors that productionwas proceeding without incident. Brody's complaint alsoincluded the following statements as examples of alleged mis-representations:       September 19, 1995: McCracken told Morgan Stan-       ley that there were "no supply constraints" on the       Indigo2.       September 21, 1995: McCracken announced at an       industry conference that Indigo2 sales growth "was       accelerating."       September 22, 1995: McCracken told Morgan Stan-       ley that "that there is no problem with [Indigo2], nor       is there an engineering halt."       September 26, 1995: SGI announced "volume       shipments" of the Indigo2 workstation.The shortage of ASIC chips for the Indigo2 workstationcompounded other major problems for SGI. The companywas suffering through declining sales to the United Statesgovernment and Original Equipment Manufacturers("OEM"), languishing demand in Europe, and complicationsresulting from the reorganization of its sales force. As theseproblems became apparent, investors began to lose confidencein SGI's ability to maintain its high growth rate, and as aresult, SGI's stock dropped to a low of $29-7/8 on October 9,1995.On October 19, 1995, SGI announced that its revenue hadgrown just 33% during the first quarter of FY96, well belowthe projected growth of 40%. The disappointing first quarterperformance, according to Brody, caused SGI's officers tofear another drop in the value of SGI stock. To prevent sucha drop, Brody asserts that SGI's officers allegedly conspiredto restore investor confidence by downplaying SGI's prob-lems. In furtherance of their alleged "conspiracy," SGI's offi-cers made the following statements which were intended toartificially inflate the value of SGI stock:       October 19, 1995: SGI issued a press release report-       ing that the Indigo2 was shipping in volume.       October 19, 1995: In a conference call, McCracken       and other officers told securities analysts and institu-       tional investors that SGI's sales force reorganization       had been successful. The officers attributed the       shortcoming in first quarter growth to a "temporary       pause" in OEM sales, and a brief drop in demand       from the U.S. Government and French businesses.       SGI assured investors that (1) there were no manu-       facturing problems with or supply constraints on the       Indigo2; (2) demand was strong for the workstation,       and it was being shipped in volume; (3) the Indigo2       upgrade was on schedule and would be introduced in       January 1996 as planned; and (4) the goal of 40%       revenue growth for FY96 would be achieved.       October 19, 1995: McCracken stated during an inter-       view that SGI's first quarter performance was       "probably less" than the growth the company would       see during FY96.To further inflate the value of SGI stock, the companyannounced its plan to repurchase 1.3 million of its own sharesimmediately and another 5.7 million over a longer period.According to Brody, the statements had their intended effect:SGI's stock price dropped only slightly despite its disappoint-ing first quarter results.SGI's problems continued throughout October 1995. SGIagain failed to ship the Indigo2 in volume and its sales contin-ued to decline because the sales force reorganization had beenineffective. Moreover, demand for the Indigo2 remained lowamong OEM and European customers. As a result, SGI felleven farther below its target of 40% growth for FY96.Brody alleges that SGI's officers learned of these problemsthrough internal company reports. Notwithstanding the nega-tive reports, the officers continued to make positive publicstatements in their allegedly conscious effort to mislead inves-tors:       November 2, 1995: SGI officers held a press confer-       ence for securities analysts and investors, stating that       (1) SGI would still achieve its goal of 40% revenue       growth; (2) the failure to meet growth expectations       for the first quarter resulted from temporary sales       force reorganization problems and a temporary pause       in OEM sales; (3) Indigo2 sales were beating expec-       tations, and the product was now shipping in volume       after some initial problems with the Toshiba ASIC       chips; (4) development of the Indigo2 upgrade was       proceeding as scheduled; and (5) SGI's second quar-       ter performance would exceed its first quarter perfor-       mance.       Early November 1995: SGI's first quarter report to       shareholders included a letter from McCracken stat-       ing that the Indigo2 "began shipping in volume in       September."Again, Brody contends that these false and misleadingstatements had their intended effect: SGI's stock rose from$31-1/4 on November 1, 1995 to $36-3/8 on November 3,1995. During the month of November, the individually namedSGI officers allegedly took advantage of SGI's inflated stockvalue by selling 388,188 shares of SGI stock at prices as highas $37-7/8. On December 5, 1995, SGI stock reached a class-period high of $38-3/4. By mid-December, however, rumorsbegan to circulate that SGI would again fall short of projectedgrowth in the second quarter and its stock price began to drop.In an effort to revive once more the value of the stock, SGIofficers continued to make what Brody claims were falsestatements about SGI's performance:       December 15, 1995: McCracken and another SGI       executive told Dean Witter that (1) SGI did well in       November; (2) SGI's sales force productivity was       improving; (3) SGI's sales to the U.S. government       and in Europe were likely to improve; and (4) SGI       would meet its goal of 40% growth for the second       quarter.       Mid-December 1995: McCracken and another SGI       executive told Smith Barney that despite sluggish       sales, SGI would meet its goal of 40% growth.Despite these reassurances, the price of SGI's stock continuedto fall during the month of December and by the end of themonth, it had dropped to $26-7/8.Soon thereafter, SGI began to publicly confirm the negativerumors about its performance. On January 2, 1996, the com-pany announced its disappointing second quarter results andacknowledged that revenue growth for the year would bemuch lower than expected. The next day, SGI's stock fell to$21-1/8. On January 17, 1996, SGI's officers admitted tosecurities analysts that SGI had been unable to fill Indigo2orders because of a shortage of ASIC chips and other primarycomponents. They also acknowledged that OEM, NorthAmerican, and European sales had all been down.On January 26, 1996, Brody filed a securities fraud classaction in federal district court, asserting claims for reliefunder sections 10(b) and 20A of the Securities Exchange Actof 1934, 15 U.S.C. SS 78(b) & 78t-1, and Rule 10b-5, 17C.F.R. S 240.10b-5. Brody alleged, as already indicated, thatduring the class period--September 13, 1995, to December29, 1995--SGI and its officers made material misrepresenta-tions about the condition of the company and initiated a stockrepurchase plan to inflate the price of SGI's stock. Brodyclaimed that six SGI officers took advantage of the inflatedprice and sold large blocks of stock.On May 22, 1996, Janas filed a shareholders derivative suitagainst SGI's officers and directors based on essentially thesame allegations set forth in Brody's complaint. Janasclaimed that SGI's officers breached their fiduciary duties toSGI, were grossly negligent in managing the company, andengaged in improper insider trading.The district court consolidated Brody's class action, Janas'derivative suit, and two other securities claims. 7 On Septem-ber 25, 1996, the district court dismissed Brody's complaintfor failure to state a claim, reasoning that it failed to satisfythe heightened pleading standard imposed by the PSLRA. Inthe same order, the district court dismissed Janas' derivativecomplaint because he failed to make a pre-suit demand onSGI's Board of Directors or otherwise show that a demandwould have been futile. The district court dismissed Janas'complaint with prejudice, but granted Brody leave to amend.Brody subsequently filed an amended complaint whichincluded greater factual detail than before. Nonetheless, onMay 27, 1997, the district court dismissed her amended com-plaint, again on the ground that she failed to satisfy the plead-ing requirements of the PSLRA. The district court alsogranted four of the individual officers summary judgment onBrody's claim that they made false and misleading state-ments. The district court gave Brody ten days to supplementher allegations which she declined to do.8  Accordingly, thedistrict court entered judgment against Brody. This timelyappeal followed.III.STANDARDS OF REVIEWWe review de novo the district court's dismissal of Brody'scomplaint for failure to state a claim under Federal Rule ofCivil Procedure 12(b)(6). See Johnson v. Knowles , 113 F.3d1114, 1117 (9th Cir.), cert. denied, 118 S. Ct. 559, 139 L. Ed.2d 401 (1997). On review, we accept Brody's allegations astrue and construe them in the light most favorable to her. Seeid. This Court reviews a grant of summary judgment de novo.See Ghotra v. Bandila Shipping, Inc., 113 F.3d 1050, 1054(9th Cir. 1997), cert. denied, 118 S. Ct. 1034, 140 L. Ed. 2d101 (1998). We review for abuse of discretion the districtcourt's finding that it would not have been futile for Janas tomake a demand on SGI's directors, see Greenspun v. Del E.Webb Corp., 634 F.2d 1204, 1208 (9th Cir. 1980), but reviewde novo the district court's dismissal of Janas' complaintwithout leave to amend, see Polich v. Burlington N., Inc., 942F.2d 1467, 1472 (9th Cir. 1991).We turn now to the question of whether the district courtwas correct in dismissing the complaints in this case.IV.DISCUSSIONA.The Sufficiency of Brody's ComplaintWe begin with Brody's class action. Brody contends thatthe district court erred in dismissing her complaint and insiststhat she pleaded facts sufficient to satisfy the PSLRA's plead-ing requirements. We disagree. Under the PSLRA, to repeat,Brody is required to state with particularity all facts givingrise to a strong inference of fraud. See 15 U.S.C. S 78u-4(b)(1), (2). As we discussed, in order to create a strong infer-ence of intent, Brody must state with particularity facts dem-onstrating deliberate recklessness. In order to plead "withparticularity," Brody must provide all the facts forming thebasis for her belief in the greatest detail possible.The PSLRA provides that plaintiffs alleging securitiesfraud shall "state with particularity all facts" on which theirbelief is based. 15 U.S.C. S 78u-4(b)(1) (emphasis added); seealso 15 U.S.C. S 78u-4(b)(2). Although the words "facts" and"particularity" are not defined in the statute, their meaning isplain. When a statute does not define its terms, we employ theordinary meaning of the words. See Glickman, 82 F.3d at 834.A "fact" is an "event or circumstance,"see BLACK'S LAWDICTIONARY 591 (6th ed. 1990), or "a truth known by actualexperience or observation," see RANDOM HOUSE COLLEGEDICTIONARY 473 (rev. ed. 1980). "Particularity" refers to "thequality or state of being particular," i.e.,"dealing with or giv-ing details; detailed; minute; circumstantial." Id. at 969. Thus,we read the statutory command that a plaintiff plead all the"facts" with "particularity" to mean that a plaintiff must pro-vide a list of all relevant circumstances in the greatest detailpossible.[10] Here, Brody neither states facts with sufficient particu-larity nor raises a strong inference of intent. In her FirstAmended Complaint, Brody advances two primary groundsfor her information and belief: (1) the existence of internalSGI reports that contradicted positive public statements madeby the officers; and (2) the unusual sale of a massive amountof SGI stock by the officers. Specifically, Brody alleges thatthe SGI officers received SGI internal reports notifying themof serious production and sales problems with the Indigo2.Notwithstanding the alleged negative reports, the SGI officerscontinued to make positive representations to investorsregarding production and sales of the Indigo2. Brody con-tends that the SGI officers intended for their positive com-ments to mislead investors and temporarily restore their faithin the effect: SGI's stock remained artificially inflated longenough for the officers to profit from massive and improperinsider trading.[11] Although Brody's complaint raises some inference ofintent, it lacks sufficient detail and foundation necessary tomeet either the particularity or strong inference requirementsof the PSLRA. For example, Brody fails to state facts relatingto the internal reports, including their contents, who preparedthem, which officers reviewed them and from whom sheobtained the information. In short, Brody's complaint is toogeneric to raise a strong inference of intent, i.e., deliberaterecklessness. As the district court recognized, mere boiler-plate pleadings9 will rarely, if ever, raise a strong inference ofintent or otherwise satisfy the PSLRA's particularity require-ment. The district court also concluded that the sales of stockwere not so suspicious as to create a strong inference of fraud-ulent intent. We agree with the district court. For purposes ofexplanation, we examine in detail the bases for Brody's alle-gations.1. Internal reportsBrody alleges that SGI's internal reports10 alerted the offi-cers to serious production and sales problems. According toBrody, the Flash reports, Financial Statements/Packages andStop Ship reports announced that: (1) SGI was not shippingthe Indigo2 workstation in volume; (2) North American andEuropean sales remained slow; and (3) SGI would not meetits revenue and growth targets for FY96. Brody contends thatthe reports notified the officers that SGI was suffering "weakNorth American sales due to continuing problems with itsNorth American direct sales force" and "a very poor Oct.,with revenues, net income and earnings per share well belowforecasted and budgeted levels."According to Brody, the officers conducted several meet-ings during which they entered into a "conspiracy of silence"whereby they agreed to downplay the seriousness of the com-pany's problems. However, Brody does not plead facts to cor-roborate her allegations. Instead, she merely provides a list ofsources from which she allegedly obtained her information.The boilerplate section of her complaint, titled "Basis ofAllegations," states that:       Plaintiffs have alleged the foregoing based upon the       investigation of their counsel, which included a       review of SGI's SEC filings, securities analysts       reports and advisories about the Company, press       releases issued by the Company, media reports about       the Company and discussions with consultants, and       believe that substantial evidentiary support will exist       for the allegations [ ] after a reasonable opportunity       for discovery.This paragraph is an insufficient basis for fraud allegationsbecause it fails to state "with particularity all facts on which[her] belief is formed." See 15 U.S.C. S 78u-4(b)(1). Thismeans that a plaintiff must provide, in the greatest detail pos-sible, all the relevant facts forming the basis of her belief. Itis not sufficient for a plaintiff's pleadings to set forth a beliefthat certain specified sources will reveal, after appropriate dis-covery, facts that will validate her claim. In this case, Brody'scomplaint does not include adequate corroborating details.She does not mention, for instance, how she learned of thereports, who drafted them, or which officers received them.Nor does she include an adequate description of their contentswhich we believe--if they did exist--would include countlessspecifics regarding ASIC chip shortages, volume shortages,negative financial projections, and so on. We would expectthat a proper complaint which purports to rely on the exis-tence of internal reports would contain at least some specificsfrom those reports.In the absence of such specifics, we cannot ascertainwhether the officers had the actual or constructive knowledgeof SGI's problems that would cause their optimistic represen-tations to the contrary to be consciously misleading. In otherwords, in the absence of such specifics, we cannot determinewhether the officers knew that their statements were false atthe time they were made--a required element in pleadingfraudulent intent. See, e.g., Denny v. Barber, 576 F.2d 465,470 (2d Cir. 1978). Brody would have us speculate as to thecontents of the reports, the severity of the problems, and theknowledge of the officers. We decline to do so.Facts giving rise to a mere speculative inference of intent,or even to a reasonable inference of intent, are not the sameas facts giving rise to a strong inference of intent. The PSLRArequires, to repeat, that Brody state with particularity factsgiving rise to a strong inference of fraudulent intent. See 15U.S.C. S 78u-4(b)(2). We understand this to mean that Brodymust plead in the greatest detail facts demonstrating, at aminimum, deliberately or consciously reckless behavior.While we hold that the unsubstantiated internal reports aloneare insufficient to demonstrate such recklessness, we cannotyet answer the larger question of whether Brody's complaint,considered in its entirety, states facts which give rise to astrong inference of intent. Accordingly, we turn to the alleg-edly suspicious stock sales.2. Stock salesBrody alleges that six individual officers engaged in mas-sive insider trading during the fifteen-week class period, col-lectively selling 388,188 shares of stock totaling $13,821,053in proceeds. The district court determined that although twoof the individual defendants' sales were suspicious, the alle-gations overall failed to raise a strong inference of intent. Weagree.[12] Although "unusual" or "suspicious" stock sales by cor-porate insiders may constitute circumstantial evidence ofscienter, see Provenz, 102 F.3d at 1491, 11 insider trading issuspicious only when it is "dramatically out of line with priortrading practices at times calculated to maximize the personalbenefit from undisclosed inside information." In re AppleComputer Sec. Litig., 886 F.2d 1109, 1117 (9th Cir. 1989).Among the relevant factors to consider are: (1) the amountand percentage of shares sold by insiders; (2) the timing of thesales; and (3) whether the sales were consistent with the insid-er's prior trading history. See, e.g. , Provenz, 102 F.3d at 1491.Brody argues that the district court erred in concluding thatthe officers' sales of SGI stock during the class period did notgive rise to a strong inference of fraudulent intent. Specifi-cally, she contends that the district court (1) improperly con-sidered SEC filings in ruling on the motion to dismiss; (2)improperly treated the officers' stock options as stock sharesfor purposes of evaluating their stock sales; and (3) errone-ously concluded that the officers' stock sales were notunusual or suspicious. We address each argument in turn.[13] First, we disagree and hold that it was proper to con-sider the SEC filings under the incorporation by referencedoctrine. That doctrine permits a district court to considerdocuments "whose contents are alleged in a complaint andwhose authenticity no party questions, but which are notphysically attached to the [plaintiff's] pleading." Branch v.Tunnel, 14 F.3d 449, 454 (9th Cir. 1994). In this case, Brodyalleges the contents of the SEC filings in her complaint. Shestates that her allegations are based in part on a review ofSGI's SEC filings, and she clearly gleaned from the SECForm 3 and 4 filings many of the facts regarding the officers'stock sales. Although Brody questions the veracity of the SECforms, her ongoing and substantial reliance on the forms as abasis for her allegations substantially weakens her position.As the district court pointed out, "[h]aving raised questionsabout [officers'] stock sales, based [her ] allegations on [offi-cers'] SEC filings, and submitted expert declarations that relyon the SEC forms at issue, [Brody] can hardly complain when[the officers] refer to the same information in their defense."The district court did not err in considering SGI's SEC filingsin ruling on the motion to dismiss.[14] Second, Brody argues that it was improper for the dis-trict court to consider the officer's vested stock options inevaluating the proper proportions of their stock sales. Brodycontends that because vested stock options are not shares,they should not be treated as such for the purpose of calculat-ing the percentage of shares that each officer sold. We dis-agree. When evaluating stock sales, we have held that theproportion of shares actually sold by an insider to the volumeof shares he could have sold is probative of whether the salewas unusual or suspicious. See In re Worlds of Wonder Sec.Litig., 35 F.3d 1407, 1427 (9th Cir. 1994); see also Acito v.IMCERA Group, Inc., 47 F.3d 47 (2d Cir. 1995). In this case,we see no reason to distinguish vested stock options fromshares because vested stock options can be converted easilyto shares and sold immediately.12 Actual stock shares plusexercisable stock options represent the owner's trading poten-tial more accurately than the stock shares alone. Therefore, asale involving a significant portion of an insider's actualshares, but only a small portion of his shares and options com-bined, is less suspicious, other factors aside. 13 The districtcourt did not err in treating the officers' stock options asshares of stock for purposes of evaluating the suspiciousnessof their stock sales.[15] Third, we reject Brody's contention that the districtcourt erroneously concluded that the officers' stock sales werenot unusual or suspicious. This Court has recognized that only"[i]nsider trading in suspicious amounts or at suspicious timesis probative of bad faith and scienter." Apple Computer, 866F.2d at 1117. Insider trading is suspicious when "dramaticallyout of line with prior trading practices at times calculated tomaximize personal benefit from undisclosed insideinformation." Id. In this case, we conclude that the stock trad-ing was not dramatically out of line with prior trading prac-tices or otherwise suspicious enough to create a stronginference of fraudulent intent.[16] All but two of the officers in this case sold a relativelysmall portion of their total holdings and traded in a mannerconsistent with prior practice. Collectively, the officers--evenincluding the two who sold the greatest percentage of theirholdings--retained 90 percent of their available holdings.President McCracken sold just 2.6 percent of his holdings andoptions. Vice President Baskett sold 7.7 percent. Senior VicePresidents Ramsay and Sekimoto sold 4.1 and 6.9 percent,respectively. Senior Vice President Kelly's and Burgess'ssales are somewhat more suspicious--they sold 43.6 and 75.3percent of their respective holdings.However, we hold that even Kelly's and Burgess's salesfail to give rise to a strong inference of fraudulent intent.Kelly sold 43.6 percent of his shares and options during theclass period, but his sales represent an insignificant portion ofthe allegedly suspicious sales. Of the 388,188 shares withwhich Brody is concerned, only 20,000 were sold by Kelly.In other words, his sales amount to just five percent of thetotal stock sales with which Brody is concerned. Andalthough Kelly had never before sold such a large quantity ofstock, he had only been with SGI for a year and had no signif-icant trading history for purposes of comparison. In light ofthe relatively low percentage of holdings sold by the otherofficers, Kelly's relatively insignificant trading activity alonedoes not give rise to a strong inference of a fraudulent schemeof the type alleged by Brody.Burgess, on the other hand, sold a vast quantity of shares.His 250,588 shares sold represent sixty-five percent of thesales with which Brody is concerned. In fact, in the absenceof Burgess's sales, the officers' sales activity during October1995 would have looked much more like any other month.Burgess's sales, in other words, appear extremely significantfor purposes of Brody's class action. However, Brody over-looks crucial facts pertaining to Burgess's sales. For instance,when Brody states that "Burgess had never before sold any ofhis SGI stock," she omits mention of the fact that SGIacquired his Toronto company, Alias, Inc., in June 1995, andthat he was legally forbidden to trade his new SGI stock untilthe second quarter of 1995. Nor does Brody mention that Bur-gess remained in Toronto, in charge of Alias, Inc., withoutany day-to-day contact with SGI's officers or involvement inits operations. Under these circumstances, Burgess's stocksales do not give rise to a strong inference of fraudulentintent.3. No strong inferenceBrody's allegations are insufficient to create a strong infer-ence of intent, i.e., that the officers acted with at least deliber-ate recklessness. Her complaint does not create a stronginference of knowing misrepresentation on the part of thedefendants. It is too generic and contains little more than evi-dence of mere motive and opportunity to commit fraud. Herassertions in the complaint differ very little from the conjec-tures of many concerned and interested investors. At onetime, an immensely successful company and its officers statepublicly that the company will continue to succeed. The offi-cers then sell a noticeable quantity of shares at a considerableprofit. Shortly thereafter, the company takes a turn for theworse and suddenly, suspicion abounds. See, e.g., DiLeo v.Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990) ("The storyin this complaint is familiar in securities litigation. At onetime the firm bathes itself in a favorable light. Later the firmdiscloses that things are less rosy. The plaintiff contends thatthe difference must be attributable to fraud."). In the absenceof greater particularity and more incriminating facts, we haveno way of distinguishing Brody's allegations from the count-less "fishing expeditions" which the PSLRA was designed todeter. See H.R. CONF. REP . 104-369, at 37.[17] Congress enacted the PSLRA to put an end to thepractice of pleading "fraud by hindsight." See e.g., Medhekarv. United States Dist. Ct., 99 F.3d 325, 328 (9th Cir. 1996)(holding that Congress intended for complaints under thePSLRA to stand or fall based on the actual knowledge of theplaintiffs rather than information produced by the defendantsafter the action has been filed).14 As the district court pointedout, "[e]very sophisticated corporation uses some kind ofinternal reporting system reflecting earlier forecasts; allowingBrody to go forward with a case based on general allegationsof `negative internal reports' would expose all those compa-nies to securities litigation whenever their stock pricesdropped."15 In light of the PSLRA's purpose of establishing"uniform and more stringent pleading requirements to curtailthe filing of meritless lawsuits," H.R. CONF . REP. 104-369, at41, we conclude that Brody's general allegations regardingnegative internal reports and stock sales do not give rise to astrong inference of fraudulent intent.4. Summary JudgmentIn addition to dismissing the entire complaint, the districtcourt granted summary judgment to individual officers Bas-kett, Burgess, Ramsay and Sekimoto based upon their decla-rations stating that they were not involved in any of themisrepresentations alleged by Brody. Brody argues that thissummary judgment was improper because she was preventedby a discovery stay from securing evidence necessary tooppose the motion for summary judgment. Alternatively, shecontends that the officers failed to show that there was no tri-able issue of fact as to her fraudulent statement claim. Wereject both arguments.[18] Brody was subject to a mandatory discovery stay, see15 U.S.C. S 78u-4(b)(2), when the district court entered sum-mary judgment against her. Brody claims that the stay shouldhave been lifted in order to permit her to engage in discoveryprior to the decision on the motion for summary judgment.The district court may permit discovery, and continue a sum-mary judgment hearing, when a party is otherwise unable topresent "facts essential to justify his opposition," and offersan explanation of why this inability exists. See Fed. R. Civ.P. 56(f). "Rule 56(f) requires affidavits setting forth the par-ticular facts expected from the movant's discovery, " BraeTransp., Inc. v. Coopers & Lybrand, 790 F.2d 1439, 1443(9th Cir. 1986), and specifying "how [those facts] would pre-clude summary judgment," Garrett v. City and County of S.F.,818 F.2d 1515, 1518 (9th Cir. 1987).[19] Brody failed to comply Rule 56(f). "Failure to complywith the requirements of Rule 56(f) is a proper ground fordenying discovery and proceeding to summary judgment."Brae, 790 F.2d at 1433. In this case, Brody failed to file amotion seeking discovery16 or even explain why discoverywas necessary. She also failed to file the required affidavitdetailing with particularity the information she hoped toobtain by discovery. In short, she neglected to comply witheither of the core requirements of Rule 56(f). Therefore, not-withstanding the discovery stay, it was proper for the districtcourt to proceed to the merits of summary judgment.[20] We also agree with the district court's conclusion thatthe evidence offered by the individual officers was adequateto support summary judgment. Baskett, Burgess, Ramsay, andSekimoto submitted uncontested affidavits that they neitherparticipated in the preparation of any of the written statementsnor made any of the oral statements challenged by Brody. Sheoffers no evidence to the contrary. Thus, the individual offi-cers negated the factual basis for Brody's claim. Summaryjudgment was proper.B.The Sufficiency of Janas' ComplaintJanas, to repeat, filed a derivative suit against SGI and theindividual officers making virtually the same allegations asBrody. Janas contends that SGI's officers breached their fidu-ciary duties to SGI, were grossly negligent in managing thecompany, and engaged in improper insider trading. After con-solidating the Janas and Brody cases, the district court dis-missed Janas's claims because he failed to make and allege apre-suit demand on SGI's board of directors as required underthe rules governing derivative suits. The district court heldthat it would not have been futile for Janas to make such ademand, and dismissed the complaint without leave to amend.We hold that the district court did not abuse its discretion infinding that a pre-suit demand would not have been futile. Wealso hold that it was proper to dismiss the suit without leaveto amend.1. Failure to make demand[21] A shareholder seeking to vindicate the interests of acorporation through a derivative suit must first demand actionfrom the corporation's directors or plead with particularity thereasons why such demand would have been futile. See Fed. R.Civ. P. 23.1. Rule 23.1, however, does not establish the cir-cumstances under which demand would be futile. See Kamenv. Kemper Fin. Serv., Inc., 
500 U.S. 90, 96
, 111 S. Ct. 1711,114 L. Ed. 2d 152 (1991). For these standards, we turn to thelaw of the state of incorporation; in this instance, Delaware.To show futility under Delaware law, a plaintiff must allegeparticularized facts creating a reasonable doubt that (1) thedirectors are disinterested and independent, or (2) the chal-lenged transaction was otherwise the product of a valid exer-cise of business judgment. See Aronson v. Lewis , 473 A.2d805, 814 (Del. 1984). Janas claims that he alleges facts suffi-cient under either theory; we are not persuaded. We addresshis two arguments in turn.       a. Independent and disinterestedJanas insists that he created a reasonable doubt as to theindependence and disinterestedness of SGI's officers by aver-ring that (1) the Board engaged in a fraudulent scheme toinflate the value of SGI stock and facilitate profitable insidertrading; (2) Board members benefitted from the inflated valueof SGI stock; and (3) officer McCracken dominated theBoard. We disagree.[22] At the pleading stage, Board independence and com-pliance with the business judgment rule are presumed. SeeAronson, 473 A.2d at 815. Demand will be excused only ifthe plaintiff's allegations show the defendants' actions "wereso egregious that a substantial likelihood of director liabilityexists." Id. "[T]he mere threat of personal liability for approv-ing a questioned transaction, standing alone, is insufficient tochallenge either the independence or disinterestedness ofdirectors." Id.[23] Janas fails to plead particular facts showing that thedirectors' actions were so egregious that they faced a signifi-cant threat of liability. He fails to provide specific facts show-ing that the Board approved the stock repurchasing plan toinflate SGI's stock price artificially, or that the Boardapproved the alleged insider trading or the allegedly fraudu-lent statements. Indeed, his claim rests on a general allegationthat the Board participated in the fraudulent scheme. Suchgeneral allegations are insufficient to demonstrate that theBoard engaged in conduct that resulted in a substantial risk ofpersonal liability. Accord Seminaris v. Landa , 662 A.2d 1350,1354 (Del. Ch. 1995) (holding that plaintiff's general allega-tion that the directors "looked the other way " when theboard's chairman engaged in misconduct did not show"substantial likelihood of liability").[24] Moreover, Janas fails to plead facts demonstrating thatBoard members benefitted from the inflated value of SGIstock. Janas alleged that only two out of nine directors soldSGI stock during the class period. As to the allegation thatMcCracken dominated the Board, Janas advances no particu-larized facts to rebut the presumption that the individualdirectors were independent. Therefore, the district court didnot abuse its discretion in concluding that Janas failed toestablish a reasonable doubt that the majority of the Boardwas independent and disinterested.       b. Business judgment rule[25] Plaintiffs can also demonstrate the futility of a pre-suitdemand by creating a reasonable doubt as to whether the chal-lenged conduct is protected by the business judgment rule.Under the business judgment rule, directors are presumed tomake sound business decisions, and to inform themselvesproperly prior to making those decisions. See Grobow v.Perot, 539 A.2d 180, 189 (Del. 1988). As discussed, Janas hasnot pleaded with particularity facts showing that the Boardapproved, acquiesced in, or otherwise supported the allegedfalse statements or the allegedly improper insider trading ofSGI stock. He has not stated facts that demonstrate that theBoard intended for the stock repurchase plan to inflate artifi-cially the value of SGI stock in order to facilitate insider trad-ing. In the absence of such facts, we must presume that theBoard had a legitimate business purpose when it repurchasedSGI stock.In sum, the district court did not abuse its discretion in con-cluding that Janas failed to raise a reasonable doubt as to thesoundness of the Board's business judgment. Accordingly,Janas was not excused from the pre-suit demand requirement.2. Leave to amend[26] Finally, we consider whether the district court erred indismissing Janas's derivative action without granting himleave to amend. We have held that "[d]ismissal without leaveto amend is improper unless it is clear that the complaintcould not be saved by any amendment." Polich , 942 F.2d at1472. Here, Janas has failed to set forth any facts which hecould add to save his complaint. See In re VeriFone Sec.Litig., 11 F.3d 865, 872 (9th Cir. 1993) (denying leave toamend when plaintiffs failed to allege additional facts whichmight cure defects in complaint). Moreover, we hold that it isclear that Janas could not have amended his complaint toshow that it would have been futile to make a demand uponthe directors. As a result, we hold that dismissal with preju-dice was appropriate.V.CONCLUSIONFor the foregoing reasons, we conclude that the districtcourt did not err in dismissing Brody's complaint, grantingsummary judgment to the individual officers, and dismissingJanas's complaint without leave to amend.AFFIRMED.Volume 2 of 2FOR PUBLICATIONUNITED STATES COURT OF APPEALSFOR THE NINTH CIRCUITIn re SILICON GRAPHICS INC.SECURITIES LITIGATION.EDMUND J. JANAS,Plaintiff-Appellant,                                                      No. 97-16204v.                                                      D.C. No.EDWARD R. McCRACKEN; MICHAEL                                                      CV-96-0393-FMSRAMSAY; ROBERT K. BURGESS;THOMAS J. OSWALD; TERUYASUSEKIMOTO; FOREST BASKETT;STEPHEN GOGGIANO; WILLIAM M.KELLY; LUCILLE SHAPIRO; SILICONGRAPHICS, INC.,Defendants-Appellees.DEANNA BRODY; ANDREA S.DONALD; ISRAEL BUCK; RUTH BUCK;DENISE STRUTHERS; THOMAS G.                                                      No. 97-16240DI CICCO IRA; STEVEN B. EWALL;ROSALYN GOLAINE; JERRY KRIM;                                                      D.C. No.MARY ANNE BEKE; HERMAN                                                      CV-96-0393-FMSGROSSMAN; SAMUEL J. REINER;                                                      OPINIONDENNIS LUCAS,Plaintiffs-Appellants,v.EDWARD R. McCRACKEN; MICHAELRAMSAY; ROBERT K. BURGESS;THOMAS J. OSWALD; TERUYASUSEKIMOTO; FOREST BASKETT; STEPHEN GOGGIANO; WILLIAM M. KELLY; LUCILLE SHAPIRO; SILICONGRAPHICS, INC.,Defendants-Appellees.Appeals from the United States District Courtfor the Northern District of CaliforniaFern M. Smith, District Judge, PresidingArgued and SubmittedJune 11, 1998--San Francisco, CaliforniaFiled July 2, 1999Before: James R. Browning and Joseph T. Sneed,Circuit Judges, and John S. Rhoades,1 District Judge.Opinion by Judge Sneed; Partial Concurrence andPartial Dissent by Judge Browning

_____________________________JAMES R. BROWNING, Circuit Judge, concurring in partand dissenting in part:I respectfully dissent from the majority's holding that (1)the Private Securities Litigation Reform Act (the "ReformAct") eliminated recklessness and motive and opportunity tocommit fraud as bases for establishing scienter under S 10(b)and Rule 10b-5, and (2) the allegations of scienter in Brody'scomplaint were insufficient to survive a motion to dismiss.1Congress plainly intended the Reform Act to raise the plead-ing standard by requiring plaintiffs to allege facts raising a"strong inference" of scienter, rather than permitting plaintiffs(as this circuit did) to plead scienter "simply by saying thatscienter existed," In re Glenfed, Inc. Sec. Litig., 42 F.3d 1541,1547 (9th Cir. 1994) (en banc), but did not intend to restrictthe evidentiary bases from which the inference of scientermight be drawn. By holding to the contrary, the majorityraises the pleading bar higher than that envisioned by Con-gress, and places the Ninth Circuit at odds with both the Sec-ond and Third Circuits.I.The Reform ActThe Reform Act requires plaintiffs to "state with particular-ity facts giving rise to a strong inference" of scienter. 15U.S.C. S 78u-4(b)(2). Although the majority concedes that"the plain text of the [Reform Act] leaves it open for us toconsider recklessness and motive and opportunity as evidenceof intent," ante, at 7220, it concludes that the legislative his-tory of the Act establishes that allegations either of reckless-ness or of motive and opportunity to commit fraud are nolonger sufficient to avoid dismissal, see ante , at 7224-25.Some courts addressing the issue have also reached thisconclusion.2 Other courts have held allegations of motive andopportunity to defraud are not sufficient to support therequired inference of scienter, but have stopped short of elimi-nating allegations of recklessness as a basis for such aninference.3 A third line of cases, led by the Second Circuit inwhich the "strong inference" standard originated, have heldthat allegations of recklessness or motive and opportunity aresufficient to satisfy the "strong inference" standard. See In reAdvanta Corp. Sec. Litig., _______ F.3d _______, No. 98-1846, 1999WL 395997, at *8 (3d Cir. June 17, 1999); Press v. ChemicalInv. Servs. Corp., 166 F.3d 529, 537-38 (2d Cir. 1999).4The latter approach begins and ends with the plain text ofthe statute. The statute nowhere mentions proof of motive andopportunity to commit fraud or any other specific means ofestablishing scienter, but simply requires that plaintiffs "statewith particularity facts giving rise to a strong inference thatthe defendant acted with the required state of mind. " 15U.S.C. S 78u-4(b)(2). There is no support in the text for con-cluding that proof of recklessness5 or motive and opportunityto commit fraud6 are not sufficient to meet the "stronginference" standard.The majority concedes as much, but nonetheless resorts tolegislative history because the language of the statute "doesnot indicate whether [allegations of recklessness or motiveand opportunity] alone are enough to establish a`strong infer-ence' of intent." Ante, at 7220. In effect, the majority holdsthat the breadth and flexibility of the Reform Act's unambigu-ous pleading standard are sufficient to justify departure fromthe statute's plain text. Respectfully, that thesis is not support-able. As the Court stated in Barnhill v. Johnson , 503 U.S.393, 401 (1992), "[A]ppeals to statutory history are well takenonly to resolve `statutory ambiguity.' " See also PennsylvaniaDept. of Corrections v. Yeskey, 118 S. Ct. 1952, 1956 (1998)("[T]he fact that a statute can be applied in situations notexpressly anticipated by Congress does not demonstrateambiguity. It demonstrates breadth." (internal quotationsomitted)).7Even if it were appropriate to reach beyond the plain text,the Reform Act's legislative history does not support themajority's interpretation. Although Congress clearly intendedto adopt the Second Circuit's "strong inference " standard, thelegislative history taken as a whole does not suggest that Con-gress intended to reject the Second Circuit's holdings thatallegations of recklessness or of motive and opportunity todefraud could satisfy that standard.The majority contends that the Conference Committee"implicitly rejected" motive, opportunity, and recklessness asbases for a "strong inference" of fraud by eliminating lan-guage incorporated in the bill in the Senate by the SpecterAmendment, which purported to codify all aspects of the Sec-ond Circuit's case law applying the "strong inference" stan-dard. Ante, at 7222. The legislative history suggests, however,that the Committee rejected language added by the SpecterAmendment because it was "an incomplete and inaccuratecodification" of Second Circuit case law,8 not because theCommittee intended to restrict the ways in which a "stronginference" of scienter might be shown. Indeed, supporters ofthe defeated Specter Amendment were assured that while theReform Act did not expressly provide that plaintiffs couldplead scienter based on recklessness or motive and opportu-nity to defraud, "the guidance [provided by Second Circuitcase law] is still going to be there." 141 Cong. Rec. S19071(daily ed. Dec. 21, 1995) (statement of Sen. Dodd). 9Moreover, the Specter Amendment's codification of a spe-cific test for pleading scienter would have been inconsistentwith the provisions of the Reform Act requiring a differentstate of mind for different statements. Under the Reform Act's"safe harbor" provisions, plaintiffs must prove that "forward-looking" statements were made with "actual knowledge" thatthey were false or misleading. 15 U.S.C. SS 78u-5(c)(1)(B),77z-2(c)(1)(B). A recklessness standard for pleading thatwould apply to all statements, such as that proposed in theSpecter Amendment, would have been inconsistent with thesafe harbor's requirement of "actual knowledge " for forward-looking statements.The majority relies on a statement in the Conference Reportthat "[b]ecause the Conference Committee intends tostrengthen existing pleading requirements, it does not intendto codify the Second Circuit's case law interpreting thispleading standard . . . . For this reason, the Conference Reportchose not to include in the pleading standard certain languagerelating to motive, opportunity, or recklessness. " H.R. Conf.Rep. 104-369, at 41 & n.23 (1995), reprinted in  1995U.S.C.C.A.N. 730, 740, 747 n.23. The majority infers fromthis comment that Congress intended to impose a "morestringent" standard than that of the Second Circuit by reject-ing the sufficiency of allegations of motive and opportunityand circumstantial evidence of recklessness to establish a"strong inference" of scienter. Ante, at 7222. The more plausi-ble and direct explanation is that Congress chose not toinclude language relating to these specific modes of provingthe required intent to defraud because it was concerned onlywith adopting the Second Circuit's pleading standard, notwith adopting (or rejecting) particular factual patterns thatmight satisfy that standard. That task was left to the courts.See Advanta, 1999 WL 395997, at *16 n.8 ("[I]f Congresshad desired to eliminate motive and opportunity or reckless-ness as a basis for scienter, it could have done so expresslyin the text of the Reform Act. In our view, the fact that Con-gress considered inserting language directly addressing thisline of cases, but ultimately chose not to, suggests that itintended to leave the matter to judicial interpretation.").10Congress also declined to include in the Reform Act lan-guage relating to a variation of the second method of meetingthe Second Circuit's standard (by alleging and proving"circumstantial evidence of conscious misbehavior"11), but themajority does not suggest that because of this omission con-scious misbehavior no longer provides an appropriate basisfor inferring scienter. Indeed, the majority's own "deliberateor conscious recklessness" test focuses on conscious misbe-havior. See ante, at 7225.The majority relies heavily upon the fact that in announcinghis reasons for vetoing the Reform Act, the Presidentexpressed his concern that the legislation would elevate thepleading standard above that previously adopted in the Sec-ond Circuit. The majority argues that by overriding the Presi-dent's veto, "Congress provided further evidence of its intentto elevate the pleading standard to a level beyond that in theSecond Circuit." Ante, at 7224. This argument rests on theassumption that Congress, in overriding the President's veto,agreed with the President that the Reform Act, as passed byCongress, adopted a pleading standard more demanding thanthe Second Circuit's standard. During Senate debate on over-riding the President's veto, however, the sponsors of the billexplicitly disagreed with the President's interpretation andreaffirmed their own view that, contrary to the President'sbelief, the Reform Act's pleading standard was "faithful to theSecond Circuit's test." 141 Cong. Rec. S19067 (daily ed. Dec.21, 1995) (Sen. Dodd quoting from memorandum of Prof.Grundfest).12Other provisions of the Reform Act undermine the majori-ty's holding, particularly the majority's across-the-boardelimination of recklessness as a basis of liability. Before theReform Act was adopted, every court of appeal addressing theissue, including this one, had concluded that recklessness sat-isfied section 10(b)'s scienter requirement. See Hollinger v.Titan Capital Corp., 914 F.2d 1564, 1568-69 & n.6 (9th Cir.1990).13 When Congress intended to proscribe liability forrecklessness in the Reform Act, it did so explicitly. As noted,the standard of liability for "forward-looking " fraudulentstatements in the Reform Act's "safe harbor" provisionsrequires plaintiffs to allege that such statements were madewith "actual knowledge" of falsity. See 15 U.S.C. SS 78u-5(c)(1)(B), 77z-2(c)(1)(B). Similarly, the provisions govern-ing proportionate liability provide that joint and several liabil-ity is to be imposed only if the plaintiff has shown that thedefendant "knowingly committed a violation of the securitieslaws," 15 U.S.C. S 78u-4(g)(2)(A), a term which Congressexpressly defined to exclude "reckless conduct," 15 U.S.C.S 78u-4(g)(10)(B). These provisions suggest that if Congresshad intended to proscribe liability for recklessness in othercircumstances it would have done so directly.14The Securities and Exchange Commission is uniquely qual-ified to assess "the proper balance between the need to insureadequate disclosure and the need to avoid the adverse conse-quences of setting too low a threshold for civil liability[.]"TSC Indus., Inc. v. Northway, Inc., 
426 U.S. 438
, 449 n.10(1976) (giving deference to the SEC's interpretation of Rule14a-9). The Commission "often relies on the recklessnessstandard in its own law enforcement cases,"15 and arguesforcefully that the Reform Act did not eliminate recklessnessas a basis for liability generally. In the Commission's view,liability for recklessness is "essential to the effective function-ing of Section 10(b)," and "necessary to protect investors andthe integrity of the disclosure process."16 The Commission'samicus brief states:       Construing the Reform Act's pleading standard pro-       vision as eliminating recklessness would convert       what was intended to be a procedural provision into       a substantive change in the definition of scienter. It       would, in effect, eliminate recklessness (in private       actions) from the uniformly accepted definition of       scienter. Because the substantive law allows liability       for recklessness, it follows that plaintiffs must be       allowed to plead that the defendants acted recklessly.       If plaintiffs can state with particularity facts giving       rise to a strong inference that defendants acted reck-       lessly, their complaint is sufficient under the Reform       Act.Brief of Amicus SEC at 18-19 (emphases in original). 17 TheCommission's rationale is shared by the Third Circuit, whichrecently stated: "Retaining recklessness not only is consistentwith the Reform Act's expressly procedural language, butalso promotes the policy objectives of discouraging deliberateignorance and preventing defendants from escaping liabilitysolely because of the difficulty of proving conscious intent tocommit fraud." Advanta, 1999 WL 395997, at *8.The Senate Report stated that "[t]he Committee does notadopt a new and untested pleading standard that would gener-ate additional litigation."18 The pleading standard proposed bythe majority, however, would require plaintiffs to plead"deliberate or conscious recklessness," a formulation notfound in the text of the statute, in the legislative history, or inany case heretofore litigated, and rejected by the responsibleadministrative agency; it would eliminate recklessness as abasis for liability, and treat allegations of motive and opportu-nity to commit fraud as insufficient to allege scienter. It is"new," "untested," and certain to "generate additionallitigation."II.Brody's ComplaintThe Reform Act, properly interpreted, permits plaintiffs toplead a strong inference of scienter by alleging with particu-larity facts that constitute circumstantial evidence of recklessor conscious misbehavior, or a motive and opportunity todefraud. Brody's complaint satisfies this standard by settingforth, in adequate detail, the factual basis for a strong infer-ence that Silicon Graphics, Inc. ("SGI" or "the Company")and its officers knowingly or recklessly misrepresented thestate of the Company's affairs and, as evidenced by the indi-vidual defendants' insider stock sales, had the motive andopportunity to defraud. Dismissal is not warranted because itdoes not "appear[ ] beyond doubt that plaintiff can prove noset of facts in support of [her] claim which would entitle [her]to relief," Neubronner v. Milken, 6 F.3d 666, 669 (9th Cir.1993) (emphasis added, internal quotations omitted), evenunder the majority's "deliberate recklessness " standard.1.ParticularityBefore considering whether they support a "stronginference" of fraud, the court must assess the particularity ofBrody's allegations. Federal Rule of Civil Procedure 9(b) pro-vides that "the circumstances constituting fraud or mistakeshall be stated with particularity." Fed. R. Civ. P. 9(b). TheReform Act modifies this requirement, providing that a secur-ities fraud complaint shall identify: (1) each statement allegedto have been misleading; (2) the reason or reasons why thestatement is misleading; and (3) all facts on which that beliefis formed. See 15 U.S.C. S 78u-4(b)(1). Brody satisfies eachrequirement.Brody alleged that during the class period--September 13,1995 to December 29, 1995--SGI and the individual defen-dants made material misrepresentations regarding the condi-tion of the Company in order to inflate the price of its stockand facilitate profitable insider trading. Brody challengedeleven allegedly misleading statements made by officers ofSGI,19 described the content of each, and either named theindividuals who made the statements, or identified them withenough specificity to permit SGI to determine the source.Thus, Brody has given the defendants adequate notice of thespecific instances of alleged fraud grounding her complaint topermit them to respond. See 5 Charles Alan Wright & ArthurR. Miller, Federal Practice and ProcedureS 1298 (2d ed.1990) ("Perhaps the most basic consideration in making ajudgment as to the sufficiency of a pleading is the determina-tion of how much detail is necessary to give adequate noticeto an adverse party and enable him to prepare a responsivepleading.").Brody also adequately pled facts showing why these elevenstatements were false when made, alleging "specific problemsundermining a defendant's optimistic claims[.]" Fecht v.Price Co., 70 F.3d 1078, 1083 (9th Cir. 1995). The statementschallenged by Brody can be grouped into three categories: (1)statements assuring investors that there were no problemswith the production and distribution of SGI's improved lineof graphic design computers called the "Indigo2 ImpactWorkstation" ("Indigo2"); (2) statements acknowledgingsluggish sales in North America and Europe, but downplayingtheir significance; and (3) statements predicting SGI wouldmeet its goal of 40% growth for Fiscal Year 1996. Brody'scomplaint pleads facts that conflict with each of these catego-ries of statements, alleging that confidential SGI reportsinformed officers as early as September 1995 that: (1) SGIwas encountering difficulty securing enough components toproduce Indigo2 workstations in volume; (2) SGI continuedto experience sluggish sales in North America and Europe;and (3) these problems made it impossible for SGI to meet itsannual or quarterly growth targets for Fiscal Year 1996.Because Brody's allegations are based on information andbelief,20 she was required to "state with particularity all factson which that belief is formed." 15 U.S.C. S 78u-4(b)(1). Shemust therefore allege facts reflecting "the who, what, when,where, and how" with respect to the facts underlying herclaim. Advanta, 1999 WL 395887, at *7 (internal quotationsomitted).21 The facts alleged by Brody are of two kinds: (1)internal SGI reports indicating that the defendants were awareof problems that made their favorable statements false andmisleading; and (2) allegations of "suspicious " insider tradingby the defendants. There is no dispute that the allegations inthe second category were sufficiently particularized, but themajority concludes that the allegations in the first category are"too generic" to meet the Reform Act's pleading require-ments. Ante, at 7235.Brody's complaint identified three types of internal statusreports allegedly containing information contrary to thedefendants' public statements: (1) daily reports; (2) monthlyfinancial reports; and (3) "Stop Ship" reports. The daily andmonthly reports included manufacturing, sales, and financialdata. Monthly reports were broken down into "FlashReports," brief reports distributed at the end of the month, and"Monthly Financial Statements/Packages," more detailedreports distributed within ten days of the close of the month.Brody alleged that daily and monthly reports: (1) were pre-pared by "SGI's financial department" (who ); (2) informed"SGI's top managers, such as [the individual defendants]" ofproduction problems with the Indigo2, as well as sluggishsales in North America and Europe which resulted in SGI'sinability to meet its financial goals (what); (3) were distrib-uted at specific times during the class period22 (when); (4)were presented in the form of daily reports, "Flash Reports,"and "Monthly Financial Statements/Packages" (where); and(5) were suppressed by the named defendants in an allegedcover-up, leading to false statements about the Indigo2, NorthAmerican and European sales, and the Company's ability tomeet its financial goals (how).The "Stop Ship" report: (1) was prepared by "the market-ing, engineering and manufacturing managers" in conjunctionwith Indigo2's "Program Director" (who); (2) informed thenamed defendants of "serious quality and performanceproblems" with Indigo2 due to defects in the computer chip(what); (3) was distributed to the officers in "mid-Sept. 1995"(when); (4) was presented in report form (where); and (5) wassuppressed by the named defendants in an alleged cover-up,leading to false statements about the production and shippingof Indigo2 (how).Admittedly, Brody's allegations are not as detailed as theycould have been. The complaint did not identify the specificperson who drafted the reports, nor did it state with exactingdetail the content of the reports; it did not include specificinformation about component shortages, volume shortages, ornegative financial news in the internal reports, for example.23Such precise detail, however, is neither expected nor requiredat the pleading stage of the proceedings:       [W]e cannot hold plaintiffs to a standard that would       effectively require them, pre-discovery, to plead evi-       dence. Rule 9(b) proscribes the pleading of "fraud by       hindsight," but neither can plaintiffs be expected to       plead fraud with complete insight.Shaw v. Digital Equip. Corp., 82 F.3d 1194, 1225 (1st Cir.1996) (citation omitted).24Because Brody's complaint sets forth, in adequate detail,the factual basis for her belief that SGI and its officers com-mitted fraud, the majority erroneously concludes that thecomplaint failed to satisfy the Reform Act's particularityrequirements.2."Strong Inference" of FraudBrody's complaint alleges two factual bases for inferringscienter: (1) internal SGI reports indicating the defendantswere aware of problems that made their favorable statementsfalse and misleading; and (2) "massive" insider sales of SGIstock by the defendants during a period when the Company'sstock price was peaking.a.Internal ReportsBrody alleged that numerous internal reports generated bySGI revealed financial and production problems not fully dis-closed to the public until months later. The majority con-cludes that Brody's allegations are "too generic to raise astrong inference of intent[.]" Ante, at 7235. The internalreports referred to in Brody's complaint were described insufficient detail as to the source, relevant content, and distri-bution to form the basis for a strong inference that SGI's offi-cers knew the representations they were making to the publicwere false when made. Brody alleged that "SGI's top manag-ers, such as [the individual defendants]" received "FlashReports" and "Monthly Financial Statements/Packages" pre-pared by "SGI's financial department." These reports, whichwere distributed in October, November, and December of1995,25 allegedly described production problems with theIndigo2, as well as sluggish sales in North America andEurope which were inhibiting the Company's ability to meetits financial goals.26 The complaint alleged that although thesereports disclosed "weak" sales and "net income and earningsper share well below forecasted and budgeted levels, " SGIrepeatedly assured investors that it would meet revenue andgrowth goals.Brody also alleged the defendants received a "Stop Ship"report prepared in "mid-Sept. 1995" by "the marketing, engi-neering and manufacturing managers" in conjunction with theIndigo2's "Program Director," which informed the nameddefendants of "serious quality and performance problems withthe Indigo2 IMPACT Workstations due to the ASIC chip per-formance problems as it attempted to assemble and ship theIndigo2 IMPACT Workstations in volume in Sept. 1995."The complaint alleged that despite this information,McCracken told Morgan Stanley on September 13, 1995 that"there were no supply constraints" with respect to Indigo2,and on September 22, 1995 confirmed that "there is no prob-lem with the product, nor is there an engineering halt."Allegations similar to Brody's have been held sufficient topreclude dismissal under the "strong inference " standard. InSerabian v. Amoskeag Bank Shares, Inc., 24 F.3d 357 (1stCir. 1994), the plaintiffs claimed officers and directors of abank holding company artificially inflated stock prices bymisrepresenting the bank's true financial condition. See id. at360. The complaint alleged that while the company's publicstatements characterized its loan review capabilities as"strong" and its approach to loan reserves as "conservative,"internal reports warned directors of problems in the loanreview department and "serious deficiencies" in the bank'sloan reserves. Id. at 363-64. The allegations were held suffi-cient:       [P]laintiffs do more than simply identify manage-       ment problems or point to statements that put a posi-       tive spin on the company's circumstances, without       indicating how or why defendants should have       known the descriptions were inaccurate. Rather,       these paragraphs present a contrast between what       company officials were hearing internally about their       loan review effectiveness and the adequacy of their       [loan reserves], and what the company was telling       the public at the same time.Id. at 365 (emphasis in original).27 Similarly, Brody's com-plaint alleges how and why SGI should have known its publicstatements about sales growth and Indigo2 production werefalse and misleading, and provided the basis for a stronginference of fraud by contrasting what Company officialswere hearing internally and what they were telling investorsat the same time. See also, e.g., Cosmas v. Hassett, 886 F.2d8, 12-13 (2d Cir. 1989) (strong inference test met where direc-tors allegedly knew of import restrictions on Chinese tradebut still predicted a significant part of the company's revenuewould come from exports to China).b.Insider Stock SalesBrody alleged that the six individual defendants engaged in"massive" insider trading, collectively selling 388,188 sharesof stock and realizing aggregate proceeds of $13,821,053 dur-ing the fifteen-week class period. The majority determinesthat sales by two of the individual defendants were"somewhat" suspicious, ante, at 7240, but holds that the alle-gations fail to raise a strong inference of scienter."Suspicious" stock sales by corporate insiders are circum-stantial evidence of intent to defraud. In re Apple ComputerSec. Litig., 886 F.2d 1109, 1117 (9th Cir. 1989). Insider trad-ing is suspicious when "dramatically out of line with priortrading practices at times calculated to maximize personalbenefit from undisclosed inside information." Id. As themajority indicates, sales during the class period by threedefendants with significant trading histories--McCracken,Baskett, and Ramsay--did not deviate dramatically from theirprior sales. McCracken sold 60,000 shares during the classperiod, but routinely sold comparable blocks of SGI stock inprevious quarters. Baskett and Ramsay sold 30,000 and20,000 shares respectively during the class period, but bothpreviously sold larger quantities of SGI stock. If vested stockoptions are considered, four of the individual defendants soldrelatively modest portions of the shares they could have sold:McCracken sold 2.6% of his holdings and options; Baskett7.7%; Ramsay 4.1%; and Sekimoto 6.9%. These facts weighagainst Brody's claim. See Acito v. IMCERA Group, Inc., 47F.3d 47, 54 (2d Cir. 1995) (sale by retired director of "lessthan 11% of his holdings"); In re Worlds of Wonder Sec.Litig., 35 F.3d 1407, 1427-28 (9th Cir. 1994) (sale of "onlya minuscule fraction" of stock holdings); Apple Computer,886 F.2d at 1117 (collective sale of 8% of stock holdings).However, Senior Vice Presidents Kelly and Burgess soldsignificant percentages (43.6% and 75.3% respectively) of theshares they could have sold, if vested options are included. Ifvested options are excluded, Kelly and Burgess sold 95% and99.8% of their holdings respectively. Viewed in the light mostfavorable to Brody, either set of data provides support for aninference of fraud sufficient to preclude dismissal, seeStevelman v. Alias Research Inc., _______ F.3d _______, No. 97-9544,1999 WL 187646, at *1, *5-7 (2d Cir. Apr. 5, 1999) (stronginference of fraud where complaint alleged sale of 40% ofshares by CEO, and "thousands" of shares by two vice presi-dents); Shaw, 82 F.3d at 1224 (sales of 68% and 20% by twodirectors militates against motion to dismiss), 28 especiallyconsidering the allegation that all of the named defendantssold some stock during the class period, see Friedberg v. Dis-creet Logic Inc., 959 F. Supp. 42, 51-52 (D. Mass. 1997)(refusing to dismiss complaint brought under the Reform Actwhere two officers sold 33% and 50% of their respectivestock holdings, and each of the named defendants sold somestock).29The majority concedes that the sales by Burgess of morethan a quarter-million shares valued at $8 million "appearextremely significant for purposes of Brody's class action,"ante, at 7241, but nonetheless concludes that the allegationswere insufficient:       Brody overlooks crucial facts pertaining to Burgess's       sales. For instance, when Brody states that "Burgess       had never before sold any of his SGI stock," she       omits mention of the fact that SGI acquired his       Toronto company, Alias, Inc., in June 1995, and that       he was legally forbidden to trade his new SGI stock       until the second quarter of 1995. Nor does Brody       mention that Burgess remained in Toronto, in charge       of Alias, Inc., without any day-to-day contact with       SGI's officers or involvement in its operations.       Under these circumstances, Burgess's stock sales do       not give rise to a strong inference of fraudulent       intent.Ante, at 7241. While benign explanations for insider stocksales, if unrebutted,30 are properly considered on a motion forsummary judgment, see, e.g., Provenz v. Miller, 102 F.3d1478, 1491 (9th Cir. 1996), review under Rule 12(b)(6) isconfined to the allegations of the complaint, which must beaccepted as true, see, e.g., Rubinstein v. Collins, 20 F.3d 160,169 n.38 (5th Cir. 1994) (refusing to look beyond the fourcorners of the complaint when reviewing a motion to dismisseven though defendants claimed that the alleged insider stocksales "were innocuous because they were made in response totax considerations").31Considering the allegations regarding insider sales and theallegations regarding internal corporate memoranda together,Brody successfully surmounted the Reform Act's pleadinghurdle. As the Supreme Court has noted, "[I]ndividual piecesof evidence, insufficient in themselves to prove a point, mayin cumulation prove it. The sum of an evidentiary presentationmay well be greater than its constituent parts." Bourjaily v.United States, 
483 U.S. 171, 179
 -80 (1987) (examining the"simple facts of evidentiary life"). The allegations regardingthe internal reports, if true, tend to show that the defendantsknowingly misrepresented SGI's ability to meet its growthtargets, and knowingly or recklessly misrepresented the Com-pany's internal affairs, particularly with respect to the produc-tion and distribution of Indigo2 workstations. Coupled withthe allegations of suspicious stock sales by Burgess and Kellyand across-the-board stock sales by all the individual defen-dants, plaintiffs' allegations are sufficient to raise a "stronginference" of fraud. Because it does not "appear[ ] beyonddoubt that plaintiff can prove no set of facts in support of[her] claim which would entitle [her] to relief," Neubronner,6 F.3d at 669 (emphasis added, internal quotations omitted),dismissal was unwarranted. the end

___________________________FOOTNOTES 2 The PSLRA amends the Securities Exchange Act of 1934, and appliesto private class actions brought pursuant to the Federal Rules of Civil Pro-cedure. See, e.g., 15 U.S.C. S 78u-4(a)(1) (1997).3 The Provenz rule setting forth the recklessness standard for pleading isa pre-PSLRA construct. Prior to the PSLRA, plaintiffs alleging fraud werepermitted to plead intent in general terms. See Fed. R. Civ. P. 9(b)("Malice, intent, knowledge, and other condition of mind of a person maybe averred generally"). In the context of securities litigation, we held thatplaintiffs alleging fraud merely needed to create a reasonable inference ofintent and that recklessness was sufficient for such an inference. SeeProvenz, 102 F.3d at 1490. However, this portion of Provenz is no longerbinding because when Congress enacted the PSLRA, it elevated the plead-ing requirements for securities fraud plaintiffs.4 In the Second Circuit's own recent words, it "has been lenient in allow-ing scienter issues to withstand summary judgment based on fairly tenuousinferences." Press, No. 98-7123, 1999 U.S. App. LEXIS 1494 at *21 (cit-ing In re Time Warner Inc. Sec. Litig., 9 F.3d 259, 270-71 (2d Cir. 1993)).Compare In re Time, 9 F.3d at 268-69 (holding that motive and opportu-nity or recklessness can give rise to a strong inference of intent) withProvenz, 102 F.3d at 1490 (holding that recklessness can give rise to a rea-sonable inference of intent).5 The individual defendants are Edward McCracken (President), ForestBaskett (Vice President), Robert Burgess (Senior Vice President), MichaelRamsay (Senior Vice President), Teruyasu Sekimoto (Senior Vice Presi-dent), and William Kelly (Senior Vice President).6 In reviewing dismissal under Rule 12(b)(6), we presume to be true allfacts asserted by the plaintiff. See Johnson v. Knowles, 113 F.3d 1114,1117 (9th Cir.), cert. denied, 118 S. Ct. 559, 139 L. Ed. 2d 401 (1997).7 Reiner v. McCracken, C-96-0631 FMS (N.D. Cal. Apr. 29, 1996), andKrim v. McCracken, C-96-1111 FMS (N.D. Cal. Apr. 29, 1996).8 Although Brody had included an in camera filing which purportedlydetailed counsel's investigation and described sources with the requisitespecificity, the district court properly ruled that the attempt to submit thein camera filing was inappropriate and unsupported by authority.9 The district court notes that"[o]ther complaints recently filed by plain-tiff's counsel illustrate this problem. The Court takes judicial notice of fivesecurities class action complaints filed in United States District Courts thatcontain the same boilerplate allegations of `negative internal reports'found in paragraph thirty of the complaint in this case." No. C 96-0393-FMS, at 26 n.11.10 SGI routinely produces at least three types of internal status reports:(1) daily reports; (2) monthly financial reports; and (3) "Stop Ship"reports. The daily reports include manufacturing, sales, and financial data.Monthly reports are broken down into "Flash Reports," which are pre-pared immediately at the end of the month and which summarize the com-pany's performance, and "Monthly Financial Statements/Packages,"which are more detailed reports that SGI distributes within ten days of theclose of the month. "Stop Ship" reports notify upper management of man-ufacturing problems and their likely effect on volume shipments.11 Citing In re Apple Computer Sec. Litig., 886 F.2d 1109, 1117 (9th Cir.1989). See also In re Worlds of Wonder Sec. Litig., 35 F.3d 1407, 1427(9th Cir. 1994).12 Ours is a case in point. Virtually all of the shares sold by the officersin this case, were originally vested stock options that were converted toshares and then immediately sold.13 Citing Fecht v. Price Co. , 70 F.3d 1078, 1084 (9th Cir. 1995), Brodyargues that courts disregard stock options in determining whether insidertrading is suspicious or unusual. However, Brody's reliance on Fecht ismisguided. Fecht does not broadly prohibit courts from considering stockoptions. Rather, this Court in Fecht concluded that the defendants' sale ofa significant portion of their actual stock holdings in the company wassuspicious, but did not indicate whether the volume of stock sold was sub-stantial in light of any vested options they possessed. See id. at 1084.Moreover, the Second Circuit recently considered the defendants' stockoptions in evaluating allegations of insider trading. See Acito, 47 F.3d at54.14 See also San Leandro Emergency Med. Group v. Philip Morris Co.,Inc., 75 F.3d 801, 812-13 (2d Cir. 1996) (holding that plaintiffs' unsup-ported general claim of the existence of confidential company sales reportsthat revealed the larger decline in sales is insufficient to survive a motionto dismiss because the allegations appeared to have been cobbled togetherin hindsight).15 No. C 96-0393-FMS, at 26 (N.D. Cal. Sept. 26, 1996). See alsoO'Neal Trust v. Vanstar Corp., No. C 98-0216-MJJ, slip op. at 7-8 (N.D.Cal. Dec. 22, 1998) (dismissing complaint containing boilerplate languageidentical to the language in this complaint); Berger v. Ludwick, No. C 97-0728-CAL, slip op. at 4-5 (N.D. Cal. Sept. 15, 1998) (following In re Sili-con Graphics Sec. Litig., 970 F. Supp. 746 (N.D. Cal. 1997)); Novak v.Kasaks, 997 F. Supp. 425, 431 (S.D.N.Y. 1998) (dismissing complaintcontaining boilerplate language identical to the language in this com-plaint).16 Nonetheless, she insists that the district court should have construedher motion striking the affidavits in support of officers' motion for sum-mary judgment as a motion seeking discovery, and granted it. Brody'sargument is futile, however, because even if her papers are treated as amotion seeking discovery, they fail to comply with the particularityrequirement of Rule 56(f).1 The Honorable John S. Rhoades, United States District Judge for theSouthern District of California, sitting by designation.1 I concur in two parts of the majority opinion: section IV(A)(4) (affirm-ing summary judgment in favor of Baskett, Burgess, Ramsay, and Seki-moto) and section IV(B) (affirming the dismissal of Janas' complaint).2 See, e.g., Norwood Venture Corp. v. Converse Inc., 959 F. Supp. 205,208 (S.D.N.Y. 1997); Friedberg v. Discreet Logic Inc., 959 F. Supp. 42,49-50 (D. Mass. 1997).3 See, e.g., Malin v. IVAX Corp., 17 F. Supp. 2d 1345, 1356-57 (S.D.Fla. 1998).4 See also, e.g., In re Health Management, Inc. Sec. Litig., 970 F.Supp.192, 201 (E.D.N.Y 1997); Fugman v. Aprogenex, Inc., 961 F. Supp. 1190,1195 (N.D. Ill. 1997).5 "Recklessness" involves "a highly unreasonable omission, involvingnot merely simple, or even inexcusable negligence, but an extreme depar-ture from the standards of ordinary care, and which presents a danger ofmisleading buyers or sellers that is either known to the defendant or is soobvious that the actor must have been aware of it. " Hollinger v. TitanCapital Corp., 914 F.2d 1564, 1569 (9th Cir. 1990) (quoting SundstrandCorp. v. Sun Chem. Corp., 553 F.2d 1033, 1045 (7th Cir. 1977)).6 The Second Circuit defines "motive and opportunity" as follows:"Motive would entail concrete benefits that could be realized by one ormore of the false statements and wrongful nondisclosures alleged. Oppor-tunity would entail the means and likely prospect of achieving concretebenefits by the means alleged." Shields v. Citytrust Bancorp, Inc., 25 F.3d1124, 1130 (2d Cir. 1994).7 See also In re Catapult Enter., Inc., 165 F.3d 747, 753 (9th Cir. 1999)("[B]ecause we discern no ambiguity in the plain statutory language, weneed not resort to legislative history."); United States v. Phelps, 895 F.2d1281, 1283 (9th Cir. 1990) (Kozinski, J., dissenting from order denyingpetition for rehearing en banc) ("In deciding whether it is appropriate togo beyond statutory language, the touchstone is not breadth butambiguity[.]").8 141 Cong. Rec. S19067 (daily ed. Dec. 21, 1995) (Sen. Dodd quotingfrom memorandum of Prof. Grundfest); see also  141 Cong. Rec. S17960(daily ed. Dec. 5, 1995) (statement of Sen. Dodd) ("The Senator's amend-ment adopted the guidance of the [S]econd[C]ircuit, but the amendment. . . completely omits a critical qualification in the case law. The courtshave held that `where motive is not apparent, a plaintiff may plead scienterby identifying circumstances' indicating wrongful behavior, but `thestrength of the circumstantial allegations must be correspondingly greater'from the number of cases."); 141 Cong. Rec. S19068 (daily ed. Dec. 21,1995) (statement of Sen. Dodd) ("The Specter amendment . . . did notreally follow the guidance of the [S]econd[C]ircuit. So that is the reasonthat amendment was taken out . . . . But the suggestion that the standardand--the guidance, rather, was included in the Specter amendment, omits--omits that where a motive is not apparent, the strength of circumstantialallegations must be correspondingly greater. That was omitted.").9 Accord 141 Cong. Rec. S19068 (daily ed. Dec. 21, 1995) (statement ofSen. Dodd) ("We have left out the guidance. That does not mean you dis-regard it."); see also H.R. Conf. Rep. 104-369, at 41 (1995), reprinted in1995 U.S.C.C.A.N. 730, 740 ("The Conference Committee language isbased in part on the pleading standard of the Second Circuit."); S. Rep.104-98, at 15 (1995), reprinted in 1995 U.S.C.C.A.N. 679, 694 ("TheCommittee does not intend to codify the Second Circuit's caselaw inter-preting this pleading standard, although courts may find this body of lawinstructive.").10 See also, e.g., 141 Cong. Rec. S17960 (daily ed. Dec. 5, 1995) (state-ment of Sen. Dodd) ("[I]nstead of trying to take each case that came underthe [S]econd [C]ircuit, we are trying to get to the point where we wouldhave well-pleaded complaints. We are using the standards in the [S]econd[C]ircuit in that regard, then letting the courts--as these matters will--test.They can then refer to specific cases, the [S]econd [C]ircuit, otherwise, todetermine if these standards are based on facts and circumstances in a par-ticular case.").11 Press, 166 F.3d at 538 ("As a pleading requirement, a plaintiff musteither (a) allege facts to show that `defendants had both motive and oppor-tunity to commit fraud' or (b) allege facts that`constitute strong circum-stantial evidence of conscious misbehavior or recklessness.' " (emphasisadded) (quoting Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1128 (2dCir. 1994))).12 Accord 141 Cong. Rec. S19150 (daily ed. Dec. 22, 1995) (statementof Sen. Domenici) ("The President objected to the pleading standard. Yetit is the Second Circuit's pleading standard."); 141 Cong. Rec. S19,068(daily ed. Dec. 21, 1995) (statement of Sen. Dodd) (the Reform Act "metthe [S]econd [C]ircuit standard"); see also 141 Cong. Rec. H15219 (dailyed. Dec. 20, 1995) (statement of Rep. Lofgren) ("The President says hesupports the [S]econd [C]ircuit standard for pleading. So do I. That is whatis included in this bill."); 141 Cong. Rec. H15218 (daily ed. Dec. 20,1995) (statement of Rep. Moran) ("We know we are going to have theSecond Circuit standard applied, and that in fact when legislation is atvariance with legislative history or report language, that it is the bill itselfthat prevails.").13 See also Nelson v. Serwold, 576 F.2d 1332, 1337 (9th Cir. 1978) (percuriam) ("Although the Supreme Court left undecided the questionwhether recklessness is sufficient to support liability under Rule 10b-5,distinguished jurists have long considered it so.").14 See Advanta, 1999 WL 395997, at *16 n.8 ("[I]f Congress had desiredto eliminate motive and opportunity or recklessness as a basis for scienter,it could have done so expressly in the text of the Reform Act.").15 Brief of Amicus SEC at 21.16 Brief of Amicus SEC at 17, 20.17 See also Richard H. Walker & J. Gordon Seymour, Recent Judicialand Legislative Developments Affecting the Private Securities Fraud ClassAction, 40 Ariz. L. Rev. 1003, 1027-28 (1998) ("[N]either the Reform Actnor its legislative history reflects any intention to eliminate recklessnessas a basis of liability. The recklessness standard has long been recognizedby the federal courts and is essential to investor protection.").18 S. Rep. 104-98, at 15 (1995) (Report of Senate Committee on Bank-ing, Housing and Urban Affairs), reprinted in  1995 U.S.C.C.A.N. 679,694.19 (1) September 13, 1995: SGI CEO Edward McCracken told MorganStanley that there were "no supply constraints " on the production of animproved line of graphic design computers called the "Indigo2 ImpactWorkstation" ("Indigo2"); (2) September 21, 1995: McCrackenannounced at a computer conference that sales growth was "accelerating";(3) September 22, 1995: McCracken told Morgan Stanley there was "noproblem with [the Indigo2], nor is there an engineering halt"; (4) Septem-ber 26, 1995: SGI announced "volume shipments " of the Indigo2; (5)October 19, 1995: SGI issued a press release announcing 33% revenuegrowth, and reporting that the Indigo2 was shipping in volume; (6) Octo-ber 19, 1995: SGI held a conference call during which McCracken andother executives told securities analysts and institutional investors SGI hadnot met its goal of 40% revenue growth during the first quarter of fiscalyear 1996. SGI executives explained that the reorganization of its salesforce temporarily hurt sales, but the reorganization had been successful.The executives also attributed the shortcoming to a drop in North Ameri-can and European orders. SGI assured investors that (a) there were nomanufacturing problems with or supply constraints on the Indigo2; (b)demand was strong for the workstation, and it was being shipped in vol-ume; and (c) the revenue target of 40% for Fiscal Year 96 would beachieved; (7) October 19, 1995: McCracken stated in an interview thatSGI's first quarter growth was "probably less " than the growth the Com-pany would see during Fiscal Year 1996; (8) November 2, 1995: SGIexecutives held a press conference for securities analysts and investors,stating that (a) SGI would still achieve its goal of 40% revenue growth,and its second quarter performance should better its first quarter perfor-mance; (b) the failure to meet growth expectations for the first quarterresulted from temporary sales force reorganization problems and a tempo-rary drop in sales; and (c) Indigo2 sales were beating expectations, and theproduct was now shipping in volume after some initial problems with thesupply of a key chip component; (9) Early November, 1995: SGI's firstquarter report to shareholders included a letter from McCracken statingthat the Indigo2 "began shipping in volume in September"; (10) December15, 1995: McCracken and another SGI executive told Dean Witter that (a)SGI had a strong November; (b) sales force productivity was improving;(c) European and North American sales were likely to improve; and (d)the Company would meet its goal of 40% growth for the second quarter;(11) Mid-December, 1995: McCracken and another SGI executive toldSmith Barney that SGI would meet its goal of 40% growth, notwithstand-ing sluggish sales in some areas.20 Brody contends the pleading requirements applicable to allegationsmade on information and belief do not apply to her because her allegationsare based on the investigations of her counsel, and therefore on informa-tion known personally to her. Brody's complaint includes a paragraphentitled "Basis of Allegations," which states that "Plaintiffs have allegedthe foregoing based upon the investigation of their counsel, whichincluded a review of SGI's SEC filings, securities analysts reports andadvisories about the Company and discussions with consultants, andbelieve that substantial evidentiary support will exist for the allegations. . . after a reasonable opportunity for discovery. " Brody relies on thesesources precisely because she does not have direct personal knowledge ofthe defendants' alleged misconduct. Her complaint is therefore pled oninformation and belief.21 See also Stevelman v. Alias Research Inc., _______ F.3d _______, No. 97-9544,1999 WL 187646, at *4 (2d Cir. Apr. 5, 1999) ("To state a claim with therequired particularity, a complaint must: (1) specify the statements that theplaintiff contends were fraudulent, (2) identify the speaker, (3) state whereand when the statements were made, and (4) explain why the statementswere fraudulent." (citations and internal quotations omitted)).22 Brody alleged that the individual defendants received monthly finan-cial reports "and/or" Flash Reports "on or about" October 3-4, and 10,1995, "no later than Nov. 3 or 6 and 10, 1995, " and "no later than Dec.4 or 5 and 10, 1995."23 The majority faults Brody for "fail[ing] to state facts relating to theinternal reports, including their contents, who prepared them, which offi-cers reviewed them and from whom she obtained the information." Ante,at 7234-35. This criticism is not justified. As noted, the complaintdescribed the content of the reports, identified the officers who reviewedthem (e.g., the named defendants), and who prepared them, albeit bydepartment or job title (e.g., "SGI's financial department" and "the mar-keting, engineering and manufacturing managers" in conjunction withIndigo2's "Program Director"). Greater detail was not required. See, e.g.,Stevelman, 1999 WL 187646, at *6 (strong inference of scienter founddespite plaintiff's "fail[ure] to allege in his Amended Complaint what per-centage of their [stock] holdings the other officers, besides [CEO]Bingham, liquidated in the period at issue, or how many shares theyretained; he also fails to allege whether all [company] officers sold at theinflated prices, or only some of them").The Reform Act neither explicitly nor implicitly mandates disclosure inthe complaint itself of the sources of the facts alleged. The majority citesno authority to the contrary. Although disclosure will be required duringdiscovery, see Fed. R. Civ. P. 26(a)(1)(A), at that time the district courtcan enter an appropriate order to protect informants, etc., see Fed. R. Civ.P. 26(c); Seattle Times Co. v. Rhinehart, 
467 U.S. 20
, 34-35 & n.21(1984). Considering "the possible retaliation that frequently results whena whistleblower is identified," Management Info. Techs., Inc. v. AlyeskaPipeline Serv. Co., 151 F.R.D. 478, 481 (D.D.C. 1993), the majority's crit-icism of Brody's complaint on this ground is unjustified.24 See also Press, 166 F.3d at 538 (refusing to interpret the Reform Act'spleading standard in a manner that "would make virtually impossible aplaintiff's ability to plead scienter in a financial transaction involving acorporation, institution, bank or the like that did not involve specificallygreedy comments from an authorized corporate individual").25 See supra note 22.26 Paragraph 36 of the complaint is representative:        36. As a result of the problems with the ASIC chips for use       in the Indigo2 IMPACT Workstation, as well as weak sales in       North America due to problems with SGI's North American       direct sales force, weak OEM sales and weaker than expected       sales in Europe, SGI's results for the month and quarter ended       Sept. 30, 1995 were significantly below forecasted or budgeted       levels. Each of the individual defendants received this informa-       tion by way of the Sept. "Flash" report on or about Oct. 3-4,       1995, and/or the Sept. Monthly Financial Statement/Package on       or about Oct. 10, 1995.27 The First Circuit, like the Second Circuit, applied a "strong inference"standard with respect to scienter prior to the Reform Act. See Maldonadov. Dominguez, 137 F.3d 1, 9 & n.5 (1st Cir. 1998) (citing Greenstone v.Cambex Corp., 975 F.2d 22, 25 (1st Cir. 1992)). As the First Circuitrecently observed, albeit in dicta, the Reform Act's heightened pleadingrequirements do not differ from that circuit's historical standard. See id.at 9 n.5.28 Cf. Advanta, 1999 WL 395997, at *14-15 (upholding dismissal ofcomplaint where not all defendants sold stock, and those who did sold"only small percentages of their holdings").29 Cf. Advanta, 1999 WL 395997, at *14 ("Here, three of the individualdefendants sold no stock at all during the class period, raising doubtwhether the sales were motivated by an intent to profit from inflated stockprices before the upcoming losses were reported."); Stevelman, 1999 WL187646, at *6 ("[W]e have suggested that scienter may not be inferred`strongly' when the alleged fraud is alleged to have benefitted only a sin-gle defendant in a corporate entity."); San Leandro Emergency Med.Group Profit Sharing Plan v. Philip Morris Cos., Inc., 75 F.3d 801, 814(2d Cir. 1996) ("In the context of this case, we conclude that the sale ofstock by one company executive does not give rise to a strong inferenceof the company's fraudulent intent; the fact that other defendants did notsell their shares during the relevant class period sufficiently underminesplaintiffs' claim regarding motive."); Acito , 47 F.3d at 54 ("The fact thatthe other defendants did not sell their shares during the relevant classperiod undermines plaintiffs' claim that defendants delayed notifying thepublic so that they could sell their stock at a huge profit." (citation andquotations omitted)).30 The "crucial facts" upon which the majority relies conflict with theallegations in the complaint. For example, the majority claims that Bur-gess was "without any day-to-day contact with SGI's officers or involve-ment in its operations," ante, at 7241, but the complaint alleges thatBurgess was "a Senior Vice President of the Company in charge of soft-ware development including the software used in the Indigo2 IMPACTworkstation gate arrays. Because of defendant Burgess' position with theCompany, he knew of the adverse non-public information about its busi-ness, finances, products, markets and present and future business prospectsvia access to internal corporate documents (including the Company'soperating plans, budgets and forecasts and reports of actual operationscompared thereto), conversations and connections with other corporateofficers and employees, attendance at management meetings and viareports and other information provided to him in connection therewith."31 The majority also relies on the fact that the defendants "[c]ollectively"retained a large percentage of their stock holdings. Ante, at 7240. How-ever, "an insider may not always trade all his shares in the company forwhich he possesses the inside information; the trader may hold on to aportion of his shares to hedge against the unforeseen or to obscure theinsider trading from the SEC." Worlds of Wonder, 35 F.3d at 1427.