Securities Litigation: U.S. Supreme Court Grants Certiorari to Decide Issue That Might Have Significant Impact on Registrants’ Exposure for Non-Disclosure of “Known Trends or Uncertainties” in SEC Filings

Sullivan & Cromwell LLP - March 27, 2017
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Earlier today, the U.S. Supreme Court granted certiorari in Leidos, Inc. v. Indiana Public Retirement System, No. 16-581.  This appeal, which likely will not be decided until the first half of 2018, at the earliest, presents the question of whether non-disclosure of “known trends or uncertainties” under Item 303 of Regulation S-K may give rise to private liability for securities fraud under Section 10(b) of the Securities Exchange Act of 1934.  The U.S. Supreme Court will address a split between the Second Circuit, which has held that, under some circumstances, non-disclosure under Item 303 of Regulation S-K could give rise to private securities fraud liability, and the Third and Ninth Circuits, which held that such non-disclosure does not create a private securities fraud claim.  Although the Supreme Court’s decision will not affect the obligation of registrants to comply with Item 303, it may have a significant impact on their potential exposure to securities fraud claims.