Define: Clearly Erroneous Test

The Clearly Erroneous Test is a legal standard used to determine whether a decision or action made by a regulatory body, such as a stock exchange or a sports governing body, should be overturned due to an obvious error or mistake.

Under the Clearly Erroneous Test, a decision or action is considered clearly erroneous if it is so obviously incorrect that it undermines the integrity and fairness of the regulatory process. It requires a showing of a clear and obvious error, rather than a mere difference of opinion.

The Clearly Erroneous Test is typically applied by the regulatory body that made the initial decision or action. For example, if a stock exchange makes an erroneous trade execution, it will apply the test to determine whether the trade should be canceled or adjusted.

When applying the Clearly Erroneous Test, factors such as the market conditions at the time of the error, the impact of the error on other market participants, and the reasonableness of the decision or action are taken into account. The test aims to strike a balance between correcting obvious errors and maintaining market stability.

Yes, if a decision or action is found to be clearly erroneous, it can be reversed or modified. This may involve canceling a trade, adjusting a price, or taking other appropriate corrective measures to rectify the error.

Yes, there is usually a time limit within which the Clearly Erroneous Test must be invoked. This time limit varies depending on the specific regulatory body and the circumstances of the error. It is important to act promptly to preserve the right to invoke the test.

While the Clearly Erroneous Test is primarily used in the context of regulatory bodies, its principles may be applied in other legal disputes where a clear and obvious error is alleged. However, its application may vary depending on the specific legal jurisdiction and the nature of the dispute.

If the Clearly Erroneous Test is not satisfied, the decision or action in question will generally stand. However, affected parties may have other legal avenues available to challenge the decision, such as through appeals or other dispute resolution mechanisms.

In some cases, parties may agree to waive or modify the application of the Clearly Erroneous Test through contractual agreements or specific rules established by the regulatory body. However, such waivers or modifications are typically subject to certain conditions and limitations.

In certain circumstances, the application of the Clearly Erroneous Test may be challenged in court if it is believed that the regulatory body acted arbitrarily, capriciously, or in violation of applicable laws or regulations. However, the specific legal grounds for challenging the test’s application may vary depending on the jurisdiction and the nature of the dispute.