Oct 19, 2023

Supreme Court to Address the Actionability of Corporate Omissions

Securities Attorneys (Exchange Act) By Michael Starmer
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Recently the U.S. Supreme Court granted certiorari in the case of Macquarie Infrastructure Corporation v. Moab Partners, L.P. to address whether a private party can sue a company under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 based on its failure to adhere to the disclosure mandates under Item 303 of SEC Regulation S-K.

SEC Regulation S-K Requirements

SEC Regulation S-K contains requirements for information that has to be disclosed in several kinds of SEC reports that companies frequently file with the SEC. These reports include Form 10-Ks, Form 8-Ks, and Form S-1s. Item 303 in Regulation S-K requires a company that has issued registered securities to disclose any known trends or uncertainties which are reasonably likely to have a materially favorable or unfavorable bearing on the company’s financial condition or operations in their reports to the SEC.

Section 10(b) prohibits the use of manipulation and deception in connection with the purchase or sale of securities. In furtherance of Section 10(b), SEC Rule 10b-5 make it unlawful to make an untrue statement or omit a material fact necessary to make an affirmative statement not misleading. Federal courts have held that there is an implied a private right of action under Section 10(b) for a violation SEC Rule 10b-5.

Case Background and Decision

This case emerged from an alleged omission by Macquarie Infrastructure Corporation (MIC) about the anticipated negative impact on its operations and profits due to new international regulations on the high-sulfur fuel known as 6-Oil, which comprised a significant part of MIC’s business. The plaintiff, an investor in MIC, had brought a claim against MIC alleging that its omission violated Item 303 and thus also Section 10(b). The district court dismissed the plaintiff’s complaint against MIC, reasoning MIC had not violated Item 303. The U.S. Court of Appeals for the Second Circuit disagreed and held that MIC’s alleged omission could be a violation of Item 303 and could serve as the basis for the plaintiff’s claim under Section 10(b).

The Second Circuit’s decision created a split in the law among federal circuit courts concerning the whether a violation of Item 303 can provide the basis for a private party claim under Section 10(b). The U.S. Courts of Appeals for the Third, Ninth, and Eleventh Circuits have declined to recognize that a private party Section 10(b) claim can rest on a violation of Item 303. The Supreme Court granted certiorari in MIC’s case to resolve this circuit split.

Contact Bevilacqua PLLC Today

Bevilacqua PLLC is here to help you understand the potential ramifications of these securities laws and how the Supreme Court’s upcoming decision in MIC’s appeal may impact your business. Should you need assistance in any of those regards, please contact Michael (Charlie) Starmer at