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Can Shareholders Sue for a Company’s Alleged Disclosure Failures?

The U.S. Supreme Court is set to decide whether private plaintiffs can import Item 303’s broad, subjective disclosure requirements into a Rule 10b-5 private securities fraud claim.

By James J. Beha II | October 18, 2023 at 10:00 AM
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On September 29, 2023, the U.S. Supreme Court granted certiorari in Macquarie Infrastructure Corp. v. Moab Partners, L.P., No. 22-1165, to decide whether an alleged failure to disclose a “known trend or uncertainty” under Item 303 of Regulation S-K can support a private securities fraud claim under Section 10(b) of the Securities Exchange Act and SEC Rule 10b-5.

Notably, the U.S. Court of Appeals for the Second and Ninth Circuits—where the vast majority of securities class actions have been filed in recent years—have reached conflicting answers to this question. The Supreme Court’s resolution of this conflict could have a significant effect on the scope of public companies’ potential liability for alleged securities fraud.

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