In a pivotal Supreme Court hearing on January 16, 2024, the justices grappled with the implications of Macquarie Infrastructure Corp. v. Moab Partners, L.P., focusing on the nuances of securities law and the standards for disclosure omissions. The case centers on whether a failure to disclose material information under Item 303 of the Securities and Exchange Commission (SEC) regulations can independently support a private claim under Rule 10b-5 of the Securities Exchange Act.

Counsel for Macquarie, Miss Coberly, argued that omissions are only actionable when they render a specific statement misleading, emphasizing that the law requires a clear connection between the omitted fact and the statements made. She contended that the SEC has the authority to penalize violations of Item 303 but insisted that without a misleading statement, private class action claims cannot proceed. Coberly highlighted that the PSLRA (Private Securities Litigation Reform Act) mandates specificity in identifying misleading statements, asserting that the entire management narrative cannot be treated as a single misleading statement.

Conversely, counsel for Moab, Mr. Frederick, argued that the omission of critical information about the impact of the IMO 2020 regulation on Macquarie's revenue constituted a classic half-truth, misleading investors. He maintained that reasonable investors expect comprehensive disclosures regarding known trends that could significantly affect a company's financial performance. Frederick asserted that the omission of such material information from the management discussion and analysis (MD&A) section of the filings misled investors and warranted legal action.

The justices probed the implications of these arguments, questioning the practicality of distinguishing between half-truths and pure omissions in the context of securities disclosures. They explored whether the requirement to identify specific misleading statements could limit the effectiveness of Item 303 disclosures, with some justices expressing concern that a ruling favoring Macquarie could create a loophole for companies to evade accountability for significant omissions.

As the court deliberates, the outcome of this case could reshape the landscape of securities litigation, particularly regarding the obligations of companies to disclose material information and the standards for what constitutes a misleading statement. The decision will likely clarify the balance between regulatory compliance and investor protection, with significant implications for how companies communicate risks and uncertainties to the market.