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                SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 15243 / February 3, 1997

In re Silicon Graphics, Inc. Securities Litigation, Lead Case No.
C 96-0393 FMS (N.D. Cal.)

     The Securities and Exchange Commission announced that it has
submitted for filing a friend of the court brief in In re Silicon
Graphics, Inc. Securities Litigation, a securities fraud class
action case pending before the U.S. District Court for the
Northern District of California.  The court dismissed the
plaintiffs' original complaint after finding that it did not meet
the strict pleading requirements imposed by the Private
Securities Litigation Reform Act of 1995.  One of the grounds for
dismissing the complaint was the court's determination that under
the Reform Act it was no longer sufficient for a complaint to
allege reckless behavior on the part of defendants.  Rather, the
court held, plaintiffs must allege "conscious behavior" by the
defendants and create a strong inference of "knowing"
misrepresentations.  With respect to some of the allegations, the
Court gave leave to the plaintiffs to amend the complaint.  The
amended complaint is now the subject of a new motion to dismiss.

     The Commission's brief urges the district court to
reconsider its earlier decision and to hold that recklessness is
sufficient for liability under Section 10(b) of the Securities
Exchange Act of 1934 and the Commission's Rule 10b-5.  In the
Commission's view, the Reform Act made no change in the
definition of the state of mind required to be shown in a private
securities fraud action (except in the case of certain forward-
looking statements entitled to the protection of a "safe
harbor").  In adopting a strict procedural standard for pleading
state of mind in private actions, Congress did not intend to
alter the substantive scope of the securities laws by eliminating
recklessness in such cases.

     The Commission has consistently supported a recklessness
standard for Section 10(b) liability in both Commission and
private actions under the federal securities laws because such a
standard is needed to protect investors and the securities
markets from fraudulent conduct and to protect the integrity of
the disclosure process.  The recklessness standard discourages
deliberate ignorance and also prevents defendants from escaping
liability simply because of the difficulty of proving knowledge
or conscious intent on the basis of the circumstantial evidence
frequently used in securities fraud cases.  A retreat from the
recklessness standard would greatly erode the deterrent effect of
Section 10(b) actions.  

     In its brief, the Commission points out that every court of
appeals that has considered the question of the required degree
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of state of mind, has held that recklessness is sufficient to
establish liability under Section 10(b) and Rule 10b-5.  A 

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hearing on the defendants' motion to dismiss the amended
complaint has been scheduled for March 21, 1997.