In an announcement on September 29, 2023, the U.S. Supreme Court confirmed it would be reviewing a prevalent assertion typically made in private securities litigation. This claim revolves around the purported failure to disclose, as mandated by Item 303 of Regulation S-K, or “Item 303”, allegedly supporting a case for securities fraud. The case in question here is Macquarie Infrastructure Corp., et al. v. Moab Partners, L.P., et al., No. 22-1165.
The JD Supra article informs us that the Supreme Court’s decision to engage with this argument aims to resolve ongoing disagreement among the judicial circuits on this specific point. This promises to offer a much-needed degree of certainty to litigation parties and the securities bar.
Item 303 requires companies to disclose, in their SEC filings, any known trends, uncertainties, and events likely to impact their liquidity, capital resources, and operations. A look at the case specifics reveals that the principal question before the high court is whether a failure to disclose under Item 303 creates a duty to disclose for purposes of Section 10(b) of the Securities Exchange Act. Understanding the implications of this proposed duty can bear substantial outcomes for companies reporting to SEC.
In summary, the forthcoming verdict from the Supreme Court on this matter holds enormous significance. It will dictate how legal professionals tackle such allegations in the future and determine the extent to which the specifics of Item 303 can be summoned to support a claim of securities fraud.