Can Silence Keep You Safe? New Debate On 10b-5 Liability

Law360, New York (January 20, 2015, 10:57 AM EST) -- In Stratte-McClure v. Morgan Stanley, 13-0627-cv, U.S. App. LEXIS 428 (2d Cir. Jan. 12, 2015), the Second Circuit issued a decision that confirmed that the decision to remain silent when Item 303 of Regulation S-K requires a company to speak can constitute an actionable violation of Rule 10b-5 so long as the other requirements of Rule 10b-5 are met. The Second Circuit acknowledged that its holding in Stratte-McClure constituted both an issue of first impression for the Second Circuit and set up a circuit split with the Ninth Circuit which recently held, in In re NVIDIA Corp. Securities Litigation, 768 F. 3d 1046 (9th Cir. 2014), the opposite, that Item 303's disclosure duty is not actionable under Rule 10b-5....

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