Supreme Court to Consider Whether Non-Compliance with SEC Regulation Can Give Rise to Securities Fraud Liability

May 03, 2017
In Leidos, Inc. v. Indiana Public Retirement System, No. 16-581, the U.S. Supreme Court will resolve an important circuit split regarding securities fraud liability. Specifically, the Court will determine whether Item 303 of SEC Regulation S-K (“Item 303”) creates a duty to disclose that is actionable under Section 10(b) of the Securities Exchange Act of 1934 (“Section 10(b)”) and SEC Rule 10b–5 (“Rule 10b–5”).
The Second Circuit recently held that Item 303 imposes a duty of disclosure that gives rise to liability, while the Ninth Circuit has held that it does not. The Court’s resolution of the case will not only resolve this circuit split, but could potentially expand the scope of securities fraud liability for omissions and open the door to Section 10(b) claims based on violations of other statutes or regulations.

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