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“Half-Truths,” Not “Pure Omissions”: Supreme Court Limits Section 10(b) Claims Based on Item 303 Nondisclosure to Omissions That Render Affirmative Statements Misleading
May 9, 2024On April 12, 2024, a unanimous U.S. Supreme Court issued an opinion in Macquarie Infrastructure Corp. v. Moab Partners, L.P., vacating a Second Circuit judgment that had reinstated claims under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 based on an issuer’s alleged failure to disclose business risks posed by an environmental regulation. The Supreme Court held that the Second Circuit erred in holding that a violation of Item 303 of Regulation S-K, which requires disclosure of known trends or uncertainties that may materially impact results, may serve as the basis for a Rule 10b-5 claim. The Court reasoned that Rule 10b-5(b) prohibits false statements and lies, as well as “half-truths”; it does not prohibit “pure omissions.”
