vice, scheme, or artifice to defraud,” and 10b-5(c) makes it unlawful to “engage in a[n] act, practice, or course of business" that "operates . . . as a fraud or deceit.” Further, the Supreme Court has recognized that subsections (a) and (c) “capture a wide range of conduct” and embody “expansive language.” Nonetheless, it is perhaps unlikely that subsections (a) or (c) would be deemed to extend to nondisclosure under Item 303. Courts generally require “deceptive conduct” to impose liability under Rule 10b-5(a) and (c), and reject claims where the “sole basis” is “alleged misrepresentations or omissions.” On the other hand, Macquarie teaches that the holdings of lower courts are not necessarily absolute or permanent, and seemingly established precedent can rise or fall at the Supreme Court’s command. Thus, the ultimate fate of Rule 10b-5 and its subsections, (a), (b), and (c), remains to be seen.1 -- S.Ct. -- , No. 22-1165, 2024 WL 1588706 (U.S. Apr. 12, 2024).2See 15 U.S.C. § 78j(b); 17 C.F.R. § 240.10b-5; Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 729–31 (1975).3 17 C.F.R. § 240.10b-5.4Halliburton Co. v. Erica P. John Fund, Inc., 573 U.S. 258, 267 (2014).5 Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 44 (2011).6Id. (quoting 17 C.F.R. § 240.10b-5(b)).7 17 C.F.R. § 229.303(b)(2)(ii).8 17 C.F.R. § 229.105(a).9See, e.g., Carvelli v. Ocwen Fin. Corp., 934 F.3d 1307, 1330 (11th Cir. 2019) (“[N]o court of which we are aware has found a private right of action under Item 303, and the rule itself doesn’t seem to contemplate one.”); In re NTL, Inc. Sec. Litig., 347 F. Supp. 2d 15, 37 (“[T]here is no private cause of action violation of Regulation S-K.”); Jaroslawicz v. M&T Bank Corp., 962 F.3d 701, 711 n.10 (3d Cir. 2020) (finding that neither the language of Item 105 nor the SEC’s interpretive guidance suggests that there is a private cause of action under Item 105).10 After the consolidated complaint in this case was filed, Macquarie announced on October31, 2019 its intenti

[3] 15 U.S.C. § 78j(b). [4] 17 C.F.R. § 240.10b-5(a), (c). [5] 17 C.F.R. § 240.10b-5(b). [6] Matrixx Initiatives, Inc. v. Siracusano, 131 S. Ct. 1309, 1321 (2011).

at constitutes ‘statements made’” and “when a statement is misleading as a half-truth.”55 Thus, while the Court made clear that a Rule 10b–5(b) claim must be tied to an affirmative statement, it did not provide express guidance on how strong the connection between the statement made and the alleged omission must be. But given the unambiguous language in the unanimous opinion rejecting a pure-omissions theory of liability, it is likely that courts will require plaintiffs to plead a strong connection between the affirmative statement and the alleged omission. For example, it is unlikely that a general statement about demand or other revenue indicators would be enough to support a claim based on omissions of “known trends or uncertainties.” Ultimately, the answers to these questions will be left to the lower courts to sort out: As Macquarie’s counsel responded in answer to Chief Judge Roberts, “that’s [the] kind of question that district courts answer every day.”561 15 U. S. C. § 78j(b); 17 C.F.R. § 240.10b–5(b).2Macquarie Infrastructure Corp. v. Moab Partners, No. 22-1165, 601 U.S. ___, slip op. at 2 (Apr. 12, 2024) (citing Stoneridge Inv. Partners v. Sci.-Atlanta, Inc., 552 U.S. 148, 157 (2008)).3 Stanford Law School, Federal Securities Class Action Litigations 1996 – YTD, https://securities.stanford.edu/charts.html (last visited Apr. 19, 2024). Because securities class actions are frequently followed by shareholder derivative suits, meanwhile, the total number of related lawsuits is considerably higher.4Stoneridge Inv. Partners, 552 U.S. at 157. The elements of a claim under Section 10(b) and Rule 10b–5 are: “(1) a material misrepresentation or omission by the defendant; (2) scienter; (3) a connection between the misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss causation.” Id.5Universal Health Servs., Inc. v. United States, 579 U.S. 176, 188 (2016).6Junius Const. Co. v. Cohen, 178 N.E.

Nonetheless, Malik and KBC should be of interest to securities litigants because they show that the Second Circuit—still the most fertile ground nationwide for securities class-action filings—will closely scrutinize a plaintiff’s factual allegations, and not hesitate to cut off claims absent a “strong inference” of fraudulent intent. Defendants, in the Second Circuit and elsewhere, should leave no stone unturned in challenging Section 10(b) claims on scienter grounds.1 23 F.4th 714 (7th Cir. 2022).2 17 C.F.R. § 240.10b-5(b).3 -- F.4th --, No. 20-17465, 2022 WL 853252 (9th Cir. Mar. 23, 2022).4 28 F.4th 343 (2d Cir. 2022).5 No. 20-2948-CV, 2022 WL 453439 (2d Cir. Feb. 15, 2022).

See id. at *6.In re Hain Celestial Grp. Inc. Sec. Litig., 16-cv-04581 (ADS), 2020 WL 1676762, at *9 (E.D.N.Y. Apr. 6, 2020).Id. at *11.Id. at *12. The panel consisted of Circuit Judges Pierre Leval, Robert Sack, and Michael Park.Hain, 20 F.4th at 136.Id. (quoting 17 C.F.R. § 240.10b-5(a), (c)).Id. (quoting 17 C.F.R. § 240.10b-5(b)).Id.Id.Id. at 137.Id. at 138.Lorenzo v. SEC, 139 S. Ct. 1094, 1100-01 (2019).Id. at 1101.

15 USC. § 78j(b) (2018).17 C.F.R. § 240.10b-5 (2019).15 USC. § 78j(b).

Accordingly, participants in both the securities and commodities markets, and entities otherwise subject to SEC, CFTC, or DOJ regulation, should take steps to ensure that they have proper training and systems in place to enable proper prevention and detection of conduct that these regulators may perceive as spoofing or otherwise manipulative.[1] Complaint, SEC v. Chen, No. 19-cv-12127, ECF No. 1, at ¶ 5 (D. Mass. Oct. 15, 2019) (hereinafter “Chen Complaint”) (alleging violations of Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§ 77q(a)(1), (3), and Sections 9(a)(2) and 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. §§ 78i(a)(2), 78j(b), and Rules 10b-5(a) and (c) thereunder, 17 C.F.R. §§ 240.10b-5(a), (c)); seealso Press Release, SEC, SEC Charges 18 Traders in $31 Million Stock Manipulation Scheme, Litigation Release No. 24,648 (Oct. 21, 2019), https://www.sec.gov/litigation/litreleases/2019/lr24648.htm (hereinafter “SEC Press Release”). [2]Chen Complaint ¶¶ 1, 46; SEC Press Release.[3] Complaint, United States v. Wang, No. 19-mj-6485, ECF No. 1 (D. Mass. Oct. 14, 2019); see Affidavit in Support of Criminal Complaint, Wang, No. 19-mj-6485, ECF No. 1-4, ¶ 3 (together hereinafter “Wang Complaint”) (charging criminal conspiracy to commit securities fraud, in violation of 18 U.S.C. § 371); see also Press Release, DOJ, Two Chinese Nationals Charged with Stock Spoofing Conspiracy (Oct. 15, 2019), https://www.justice.gov/usao-ma/pr/two-chinese-nationals-charged-stock-spoofing-conspiracy. [4]Chen Complaint ¶¶ 12-15.[5] Id. ¶ 1.[6]See, e.g., id. ¶¶ 50, 61.[7] Id. ¶¶ 2, 47-48; see also id. ¶¶ 49-61.

52 Id. at 1100 (quoting 17 C.F.R. § 240.10b-5, 15 U.S.C. § 78j(b), and 15 U.S.C. § 77q(a)). 53 Id.

[2] Specifically, Rule 10b-5 makes it unlawful “(a) To employ any device, scheme, or artifice to defraud, (b) To make any untrue statement of a material fact . . . , or (c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit . . . in connection with the purchase or sale of any security.” 17 C.F.R. § 240.10b-5. [3] Janus Capital Group, Inc. v. First Derivative Traders, 564 U.S. 135, 142 (2011) (holding that an investment adviser who had merely “participate[d] in the drafting of a false statement” made by another could not be held liable in a private action under Rule 10b-5(b)).

ule 10b-5 battle front between issuers and plaintiffs’ attorneys going forward. The Second Circuit, which covers New York, is a busy circuit for securities cases, and, according to data compiled by Stanford Law School, during the period 2014 and 2022, between 11% and 26% of Rule 10b-5 cases in the Second Circuit pursued a Reg S-K Item 303 theory each year.[9] However, in footnote 2 of the Court’s decision, the Court noted that the decision did not address an ongoing dispute between the parties as to whether the statements at issue were indeed “pure omissions,” as opposed to “half-truths.” This could be an indication of where the battlefront between issuers and plaintiffs’ attorneys may be heading. It is also worth noting that Rule 10b-5 claims based on half-truths, as well as disclosure violations based on other sections of federal securities laws, remain unaffected by the decision.[1] Macquarie Infrastructure Corp. v. Moab Partners, 601 U.S. ___, (U.S. April 12, 2024).[2]Id. at 1.[3] 17 CFR § 240.10b-5(b).[4]Macquarie, slip op. at 5 (quoting Universal Health Services, Inc. v. United States ex rel. Escobar, 579 U.S. 176, 188 (2016)).[5]Id.[6]Id.[7]Id.[8]Id. at 6 (quoting 15 U.S.C. §77k(a)).[9] Petition for Certiorari, Appendix at 62a.[View source.]