ALF Urges Supreme Court To Reject Securities Fraud Suits Premised On Failure To Publicly Disclose Confidential Business Information

A Securities and Exchange Commission (SEC) regulation, commonly referred to as “Item 303,” requires a publicly traded company to disclose “known trends or uncertainties that have had or that are reasonably likely to have a material favorable or unfavorable impact” on its financial performance, 17 C.F.R. § 229.303(b)(2)(ii). According to SEC guidance, Item 303 disclosure is necessary “where a trend, demand, commitment, event or uncertainty is both presently known to management and reasonably likely to have material effects on the registrant’s financial conditions or results of operations.”

Aggressive investors have seized upon the broad and vague language of Item 303 and the SEC’s guidance to file securities fraud litigation under Section 10(b) of the Securities Exchange Act premised on alleged omissions of information supposedly required to be disclosed by Item 303. SEC Rule 10b-5, which implements Section 10(b), makes it unlawful to “make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.”  17 C.F.R. § 240.10b-5(b).

The Supreme Court has granted certiorari in Macquarie Infrastructure Corp. v. Moab Partners, L.P., No. 22-1165, to resolve a circuit split as to whether investor suits brought under Section 10(b) and Rule 10b-5 can be based on an alleged failure to make a disclosure required under Item 303. ALF has filed an amicus brief urging the Court to hold that such suits are not authorized. The amicus brief was authored by Eric Boettcher and Raffi Melkonian of Wright Close & Barger, LLP & ALF Executive Vice President and General Counsel Larry Ebner.

Issue Areas:

Free Enterprise

Read the Amicus Brief:
Question(s) Presented:

Whether the implied right of action under Section 10(b) of the Securities Exchange Act and SEC Rule 10b-5 encompasses claims for alleged omissions of disclosures required under Item 303 of SEC Regulation S-K.

ALF’s Amicus Brief:

ALF’s amicus brief focuses on the importance of protecting confidential business information.  Given the potentially ruinous monetary damages and other business harms threatened by Section 10(b) class actions, allowing Section 10(b) claims to be based on the failure to make disclosures allegedly required under Item 303 would present companies with a difficult and inappropriate dilemma as to their confidential business information:  Allowing investors to sue based on alleged failure to disclose trends or uncertainties would force companies to choose between suffering the adverse competitive consequences of over-disclosure of confidential business information or risking significant financial liability in securities fraud litigation. This is why enforcement of Item 303 should be left to the SEC, not to private litigants who could exploit Item 303 by filing unwarranted or even abusive securities fraud damages suits.


On April 12, 2024, the Court issued a unanimous opinion holding that pure omissions are not actionable under SEC Rule 10b-5.


Email ALF Executive Vice President & General Counsel Lawrence Ebner.

Date Originally Posted: November 20, 2023

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