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Supreme Court hears dispute over whether Item 303 omissions can support private Rule 10b-5 claims
Summary
At oral argument in Macquarie Infrastructure Corp. v. Moab, petitioners urged that Rule 10b-5(b) requires a specific misleading statement pleaded under the PSLRA and that Item 303 omissions alone cannot sustain private securities class actions; respondents argued the MD&A or discrete Item 303 omissions can be misleading and cited IMO 2020 and an asserted 40% revenue loss as the omitted fact.
The Supreme Court heard argument in No. 22-1165, Macquarie Infrastructure Corporation v. Moab, over whether a company's failure to disclose information required by Item 303 of Regulation S-K can, by itself, support a private claim under Rule 10b-5(b).
Miss Coberly, counsel for the petitioners, told the justices that the text of Rule 10b-5(b) and the pleading rules Congress added in the Private Securities Litigation Reform Act require plaintiffs to identify a specific misleading statement before alleging omission-based liability. "The text makes clear that an omission is actionable in just one circumstance — when the omitted fact is material and necessary to make a statement not misleading," she said, arguing that treating an entire MD&A as the relevant statement would let plaintiffs convert any failure to comply…
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