I. Introduction
The two principal federal securities statutes under which civil plaintiffs may bring lawsuits for false and misleading statements or omissions of material fact are Section 10(b) of the Securities Exchange Act, 15 U.S.C. §78j(b) (“Exchange Act”), and SEC Rule 10b-5 promulgated thereunder (generally applicable to securities fraud cases), and Section 11 of the Securities Act of 1933, 15 U.S.C. §77k (“Securities Act”) (generally applicable to disclosures in registration statements for public offerings).[1] Section 12(a)(2) of the Securities Act, invoked less frequently, is closely related to Section 11 and applies to disclosures in prospectuses for public offerings.
Both Section 10(b) and Section 11 provide for liability for material misrepresentations and omissions, although they are worded slightly differently. Rule 10b-5 makes it unlawful under Section 10(b) 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.”[2] Section 11(a) makes it unlawful for “any part” of a registration statement, when effective, to contain “an untrue statement of a material fact or omit[] to state a material fact required to be stated therein or necessary to make the statements therein not misleading.”[3] Thus, both statutes provide for liability not just for affirmatively false statements, but for the omission of material facts. Courts have uniformly held, however, that to hold a defendant liable for an omission, the defendant must have a duty to disclose that omitted information.[4] Such a duty is generally triggered either by (a) an affirmative statement that is materially misleading if the omitted information is not disclosed;[5] or (b) an independent duty to disclose the information, such as one derived from statute or regulation.[6]
One of the sources of such an “independent duty” to disclose information (or liability for so-called “pure omissions”) often invoked by plaintiffs in federal securities cases has been the SEC’s regulatory requirements for disclosures in a company’s filings with the Commission, particularly SEC Regulation S-K, Item 303,[7] which requires companies in the “Management’s Discussion and Analysis of Financial Conditions and Results of Operation” (“MD&A”) section of such filings to “[d]escribe any known trends or uncertainties that have had or that are reasonably likely to have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations.”[8] For example, a plaintiff may argue that discovering internal data showing significantly declining sales from a key customer, or that a key patent is under threat, would constitute facts requiring corporate disclosure, even if they do not render any prior statements false, but as “pure omissions.”
II. The Circuit Split in Section 10(b) Cases
Until recently, courts, including courts of appeals, disagreed on whether failure to make a disclosure required by Item 303 could independently support a claim under Section 10(b). For example, in Stratte-McClure v. Morgan Stanley, 776 F.3d 94, 101 (2d Cir. 2015), the Second Circuit Court of Appeals held that “Item 303’s affirmative duty to disclose in Form 10-Qs can serve as the basis for a securities fraud claim under Section 10(b).” The Second Circuit recognized that the language of Section 10(b) imposes liability where defendants “to omit to state a material fact necessary in order to make … statements made … not misleading”—unlike Section 11 which also contains an alternative ground for liability where defendants “omitted to state a material fact required to be stated therein.” However, it reasoned that because (i) “Form 10–Qs are mandatory filings that ‘speak … to the entire market,’” and (ii) Item 303 disclosures are “required elements of those filings” that “give investors an opportunity to look at the registrant through the eyes of management,” investors would interpret the absence of an Item 303 disclosure to imply the nonexistence of “known trends or uncertainties … that the registrant reasonably expects will have a material … unfavorable impact on … revenues or income”—therefore omitting an item required to be disclosed in a 10-Q can render that financial statement “misleading,” satisfying the language of Section 10(b) and Rule 10b-5.[9] Stratte-McClure added that to state a Section 10(b) claim, the omitted facts must still satisfy the “materiality” test set forth by the Supreme Court for Section 10(b) cases in Basic Inc. v. Levinson, which took precedence over any notions of materiality indicated in Item 303.[10]
On the other hand, in In re NVIDIA Corp. Sec. Litig., 768 F.3d 1046, 1056 (9th Cir. 2014), the Ninth Circuit held that “Item 303 does not create a duty to disclose for purposes of Section 10(b) and Rule 10b-5.” In so doing, the Ninth Circuit stuck to the statutory language of Section 10(b), stating that “‘[d]isclosure is required under [Section 10(b) nor Rule 10b-5] only when necessary “to make … statements made, in the [sic] light of the circumstances under which they were made, not misleading.”’” Id. at 1054.[11] The Ninth Circuit in NVIDIA also cited the Third Circuit’s opinion by then-Judge Alito in Oran v. Stafford, 226 F.3d 275, 287-88 (3d Cir. 2000), where the Court held that (i) Item 303 does not give rise to a separate cause of action (apart from Section 10(b) or 11), and (ii) because the test for disclosure under Item 303 “varies considerably from the general test for securities fraud materiality set out by the Supreme Court in Basic,” “a violation of SK–303’s reporting requirements does not automatically give rise to a material omission under Rule 10b-5.” Having decided the omitted facts were not material under Basic, Oran concluded there was no liability under Section 10(b).[12] Stratte-McClure seized on the “does not automatically” language to state that Oran meant that liability under Section 10(b) for a violation of Item 303 was not precluded, but was consistent with Stratte-McClure’s decision that a violation of Item 303 could support Section 10(b) liability so long as the omission was material under Basic, and indicated that the Ninth Circuit was wrong to “rely” on Oran for a blanket rule to the contrary.[13]
In 2017, the Supreme Court granted certiorari on this circuit split in Leidos, Inc. v. Indiana Pub. Ret. Sys., 580 U.S. 1216 (2017), but soon dismissed the petition because the case settled. 585 U.S. 1001 (2018). Predictably, in 2023 the Supreme Court granted certiorari to resolve the split in Macquarie Infrastructure Corp. v. Moab Partners, L.P.[14]
III. Macquarie Infrastructure Corp. v. Moab Partners, L.P.
Macquarie involved a corporate subsidiary that owned liquid storage terminals. Relying on alleged violations of Item 303, plaintiffs alleged that the company’s public statements violated Section 10(b) because they omitted to disclose the extent to which the subsidiary relied on storing a fuel type that faced an international ban. Writing for a unanimous Supreme Court, Justice Sotomayor held that a violation of Item 303 can support a Section 10(b) claim only if the omission renders affirmative statements misleading, and that “[p]ure omissions are not actionable” under Section 10(b)—abrogating Stratte-McClure on this basis.[15]
Like the Ninth Circuit in NVIDIA, the Supreme Court stuck to the statutory text of Section 10(b). The Court stated, “[Rule 10b-5] prohibits omitting material facts necessary to make the ‘statements made … not misleading.’ [I]t requires disclosure of information necessary to ensure that statements already made are clear and complete…. This Rule therefore covers half-truths, not pure omissions. Logically and by its plain text, the Rule requires identifying affirmative assertions (i.e., ‘statements made’) before determining if other facts are needed to make those statements ‘not misleading.’”[16] Macquarie’s holding on its face appears to foreclose liability for pure omissions that violated Item 303, but also pure omissions that arise from the violation of other statutes or regulations, since although the case arose in the context of an alleged Item 303 violation, the language of the decision was not so limited to Item 303 but appeared to cover “pure omissions” generally.
In so holding, however, the Court drew a distinction between the language of Section 10(b)/Rule 10b-5, and Section 11, which appears to affirm that violations of Item 303 may be an independent basis of a Section 11 claim: “Statutory context confirms what the text plainly provides. Congress imposed liability for pure omissions in §11(a) of the Securities Act of 1933. Section 11(a) prohibits any registration statement that ‘contain[s] an untrue statement of a material fact or omit[s] to state a material fact required to be stated therein or necessary to make the statements therein not misleading.’ 15 U.S.C. §77k(a). By its terms, in addition to proscribing lies and half-truths, this section also creates liability for failure to speak on a subject at all… There is no similar language in §10(b) or Rule 10b-5(b)).”[17]
Justice Sotomayor rejected an argument similar to that cited in Stratte-McClure, i.e., that “reasonable investors know that Item 303 requires an MD&A to disclose all known trends and uncertainties” and failure to make such disclosures thus renders the MD&A misleading. The Court stated that this argument failed “because it reads the words ‘statements made’ out of Rule 10b-5(b) and shifts the focus of that Rule and §10(b) from fraud to disclosure.” Id. (citing Chiarella v. United States, 445 U.S. 222, 234-235 (1980) (“Section 10(b) is aptly described as a catchall provision, but what it catches must be fraud”)). The Court also rejected the argument that without private liability for “pure omissions” under Rule 10b-5(b), there will be “broad immunity” for fraudulent omissions of information that Congress and the SEC require issuers to disclose, noting that plaintiffs were still free to bring such claims for half-truths, and the SEC still retained the power to prosecute “pure omissions” that violated Item 303.[18]
Accordingly, after Macquarie it appears clear that plaintiffs may not invoke violations of Item 303—and very possibly any other statute or regulation—as an independent basis for a Section 10(b) claim, but can bring such claims under Section 11.[19]
IV. Open Issues After Macquarie
Nonetheless, after Macquarie, certain open issues remain, which are only beginning to be grappled with by the lower courts seeking to interpret Macquarie and whether and how it applies.
A. Use of Item 303 Under Section 10-b(a) and (c) Scheme Liability
For example, although Macquarie expressly dealt with liability under Rule 10b-5(b), can a plaintiff ground liability for a Item 303 violation in Rule 10b-5(a) or (c) (scheme liability), which does not require that defendant make an “untrue statement … or … omit to state a material fact necessary in order to make … statements made … not misleading”? Although there is no post-Macquarie case yet directly on point, the answer is likely yes, but the facts of the case would have to overall rise to the level of a “scheme”, regardless of whether there was a “pure omission” or not; thus this may more of a theoretical than practical inquiry.[20]
B. Using Item 303 as a Guide for Actionability of Misleading Statements
Further, parties might still be able to use Item 303 as guide for what omissions render affirmative statements misleading.[21]
C. Section 12(a)(2)
Additionally, what of Section 12(a)(2)? While Section 11 has fairly clear language imposing liability where defendants made “an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading,” Section 12(a)(2)’s language is closer to Section 10(b), as it imposes civil liability on any person who “offers or sells a security … by means of a prospectus or oral communication, which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements … not misleading.”[22] Yet, courts often say that “Sections 11 and 12(a)(2) are ‘Securities Act siblings’ with similar elements,”[23] as they both seek to ensure accurate and complete disclosure in public offerings to protect their integrity. Macquarie was wholly silent on Section 12(a)(2).
Prior to Macquarie, consistent with the notion that Sections 11 and 12 are “siblings with similar elements,” courts tended to analyze claims for “pure omissions” (including for violations of Item 303) that were brought under Section 11 and 12(a)(2), together, and without differentiating between the statutory language.[24] Further, in Stratte-McClure, the Second Circuit noted that in Panther Partners Inc. v. Ikanos Commun’s, Inc., 681 F.3d 114 (2d Cir. 2012), and Litwin v. Blackstone Group, L.P., 634 F.3d 706 (2d Cir. 2011), “we established that Item 303 creates a duty to disclose for the purposes of liability under Section 12(a)(2).”[25] At least some other circuit courts of appeals appear to take a similar approach, rather than focusing on the linguistic distinction.[26] The Ninth Circuit in Steckman v. Hart Brewing, Inc., 143 F.3d 1293, 1296 (9th Cir.1998), had also stated that “allegations which would support a claim under Item 303(a)(3)(ii) are sufficient to support a claim under section 12(a)(2).” At the same time, however, Stratte-McClure criticized the Ninth Circuit’s subsequent NVIDIA decision for, in seeking to distinguish Steckman from the Section 10(b) context, failing to recognize that Section 12(a)(2)’s language is indeed much closer to Section 10(b)/Rule 10b-5 than to Section 11.[27]
There appear to be no cases post-dating Macquarie addressing this issue directly,[28] but it is likely that violations of Item 303 will continue to provide an independent basis for liability for Section 12(a)(2) claims in many jurisdictions, at least until the Supreme Court takes up that issue directly. This is largely because of (i) the courts’ historic treatment of Section 11 and 12(a)(2) claims together, given their related goal of ensuring the strict integrity of public offerings, and (ii) Macquarie’s statement that one of the primary bases for its distinction of Item 303 in Section 10(b) versus Section 11 claims was that imposing liability for “pure omissions” under Section 10(b) would “shift[] the focus of [Rule 10b-5] and §10(b) from fraud to disclosure,” when “what [Section 10(b)] catches must be fraud.” Because Section 12(a)(2), like Section 11, is a statute that focuses on disclosure, not fraud, that rationale would not apply to Section 12(a)(2) claims.[29]
D. Pleading Knowledge of “Known Trends or Uncertainties” under Section 11
Since Item 303 requires the description of “known trends or uncertainties” reasonably likely to have a material impact, another remaining issue after Macquarie is whether, in Section 11 or 12(a)(2) cases, plaintiffs have to plead actual knowledge of such trends or uncertainties (or whether alleging facts indicating defendants “should have known” of them is enough), as well as whether such allegations are subject to the heightened pleading requires of Fed. R. Civ. P. 9(b) (for fraud allegations) or the Private Securities Litigation Reform Act (“PSLRA”).
The tension here is that Item 303 requires the pleading of “known” trends, while Section 11 and 12(a)(2)—unlike Section 10(b) which requires pleading of scienter—are strict liability or negligence statutes.
There has been a growing trend of cases holding or suggesting that pleading of actual knowledge is required.[30] At the same time, some cases, even in the same appellate court, appear to call that into question, suggesting that something like an extreme departure from the standards of ordinary care, or in any event something less than scienter, may suffice.[31] The issue can arise, for instance, in cases alleging both Section 11 and 10(b) claims, where plaintiffs feel compelled to disclaim all allegations of knowing misconduct for their Section 11 claims so that they are not deemed to “sound in fraud” and thus become subject to heightened pleading requirements; but such a disclaimer might risk defendants’ argument that they have thereby also disclaimed the “knowledge” requirement of an alleged Item 303 violation. Courts sensitive to the issue have drawn a distinction between the “knowledge” requirement for the purposes of Item 303 (especially in the context of a Section 11 or 12(a)(2) claim grounded in strict liability or negligence), and “scienter” for the purposes of a Section 10(b) fraud claim. See Jianpu, 2020 WL 5757628, at *10 (“The issue is whether the … trends were ‘known’ for purposes of Item 303, not whether Defendants acted with fraudulent intent. The Amended Complaint’s allegations are consistent with Plaintiff pleading obligations in alleging violations of Sections 11, 12, and 15; as noted above, these provisions have no scienter requirement.”).
Relatedly, generally it appears that plaintiffs need not plead such knowledge with the same heightened specificity requirements demanded by Fed. R. Civ. P. 9(b), or the PSLRA, but should nonetheless include enough detail to render the inference of defendants’ knowledge “plausible” or “reasonable.”[32]
[1] Broadly speaking, Section 10(b), and its implementing regulation, SEC Rule 10b-5, prohibits deceptive practices (including false and misleading statements and omissions) in connection with the purchase or sale of securities, and requires a showing of scienter (fraudulent intent) on the part of the defendant, while Section 11 prohibits misstatements and omissions in registration statements for the public offering of securities, and imposes strict liability therefor on certain parties, such as the issuer. Section 11 typically applies to initial public offerings, or secondary offerings, while Section 10(b) applies to the trading of securities on the market, although it can also be applied to public offerings (which also implicate the “purchase or sale of securities”).
[2] 17 CFR §240.10b-5(b).
[3] 15 U.S.C. §77k(a).
[4] See, e.g., Basic Inc. v. Levinson, 485 U.S. 224, 239 n. 17 (1988) (“[s]ilence, absent a duty to disclose, is not misleading under Rule 10b–5.”); In re Time Warner Inc. Sec. Litig., 9 F.3d 259, 267 (2d Cir.1993) (“an omission is actionable under the securities laws only when the corporation is subject to a duty to disclose the omitted facts.”); Bond Opportunity Fund II, LLC v. Heffernan, 340 F. Supp. 2d 146, 157 (D.R.I. 2004) (“A duty to disclose does not arise merely because information may be of interest to investors.”).
[5] In Section 10(b) parlance, this is triggered if defendants “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,” and in Section 11 parlance, it is triggered if defendants “omitted to state a material fact … necessary to make the statements therein not misleading.”
[6] A third source of the duty to disclose may be where a corporate insider trades on confidential information. See Glazer v. Formica Corp., 964 F.2d 149, 157 (2d Cir.1992) (duty to disclose may arise when there is “a corporate insider trad[ing] on confidential information,” a “statute or regulation requiring disclosure,” or a corporate statement that would otherwise be “inaccurate, incomplete, or misleading.” (quoting Backman v. Polaroid Corp., 910 F.2d 10, 12 (1st Cir.1990) (en banc)); accord Oran v. Stafford, 226 F.3d 275, 285–86 (3d Cir.2000).
[7] In particular, Section 13(a) of the Exchange Act requires issuers to file periodic informational statements. 15 U.S.C. §§78m(a)(1), 78l(b)(1). These statements include the “Management’s Discussion and Analysis of Financial Conditions and Results of Operation” (MD&A), in which companies must “[f]urnish the information required by Item 303 of Regulation S-K.” See SEC Form 10-K; SEC Form 10-Q.
[8] 17 CFR §229.303(b)(2)(ii) (2022). Additionally, Regulation S-K Item 105, 17 CFR §229.105 (formerly Item 503), requires that “[w]here appropriate,” a registrant “provide under the caption ‘Risk Factors’ a discussion of the material factors that make an investment in the registrant or offering speculative or risky,” and “[c[oncisely explain how each risk affects the registrant or the securities being offered.” Claims based on Item 303 and 105 are often treated together and involve similar issues. See, e.g., Panther Partners Inc. v. Jianpu Technology Inc., 2020 WL 5757628, at *7 (S.D.N.Y. Sept. 27, 2020) (“The same facts underlying an Item 303 violation may also support an Item 503 [n/k/a Item 105] violation, and a court’s rationale for determining the former may also support the same determination of the latter.”). This Article is limited to analysis of the more frequently invoked Item 303.
[9] 776 F. 3d at 102. See also Gallagher v. Abbott Labs., 269 F.3d 806, 809-10 (7th Cir. 2001) (assuming that Regulation S-K triggered disclosure obligation in Section 10(b) case but noting that adverse FDA letter postdated the 10-K omitting the alleged “known trend or uncertainty,” such that there was no Item 303 violation).
[10] Basic held that disclosure of contingent events is required “upon a balancing of both the indicated probability that the event will occur and the anticipated magnitude of the event in light of the totality of the company activity.” 485 U.S. at 238. The SEC has characterized a company’s disclosure obligations under Item 303 as follows: “(1) Is the known trend, demand, commitment, event or uncertainty likely to come to fruition? If management determines that it is not reasonably likely to occur, no disclosure is required. (2) If management cannot make that determination, it must evaluate objectively the consequences of the known trend, demand, commitment, event or uncertainty, on the assumption that it will come to fruition. Disclosure is then required unless management determines that a material effect on the registrant’s financial condition or results of operations is not reasonably likely to occur.” Management’s Discussion and Analysis of Financial Condition and Results of Operations, Exchange Act Release No. 34-26831, 54 Fed. Reg. 22427, 22430 (May 24, 1989).
[11] Citations omitted. See also Carvelli v. Ocwen Fin’l Corp., 934 F.3d 1307, 1331 (11th Cir. 2019) (following NVIDIA).
[12] 226 F.3d at 288.
[13] 776 F.3d at 103.
[14] 600 U. S. __, 144 S. Ct. 479 (2023).
[15] 601 U.S. at 259, 266.
[16] 601 U.S. at 264.
[17] Id. at 264 (citing Omnicare, Inc. v. Laborers Dist. Council Constr. Indus. Pension Fund, 575 U.S. 175, 186, n.3 (2015) (“Section 11’s omissions clause also applies when an issuer fails to make mandated disclosures—those ‘required to be stated’—in a registration statement”)).
[18] 601 U.S. at 265-66.
[19] See also In re Vroom, Inc. Sec. Litig., 2025 WL 862125, at *40 n.11 (S.D.N.Y. Mar. 18, 2025) (“While Macquarie does not address a Section 11 claim, the Supreme Court acknowledged in that case that–in contrast to Section 10(b) of the Exchange Act–‘Congress imposed liability for pure omissions in § 11(a) of the Securities Act of 1933.’”)
[20] See In re DiDi Global Inc. Sec. Litig.. 2025 WL 1909295, at *16 (S.D.N.Y. July 7, 2025) (magistrate’s report and recommendation to certify class including scheme liability claim based on omission); In re Mobileye Global Sec. Litig., 2025 WL 1126967, at *7 (S.D.N.Y. Apr. 16, 2025) (“To ensure that claims of scheme liability do not ‘evade the pleading requirements imposed in misrepresentation cases,’ a plaintiff must plead ‘something beyond misstatements and omissions,’ that is, ‘something extra that makes a violation a scheme.’ Sec. & Exch. Comm’n v. Rio Tinto plc, 41 F.4th 47, 53-54 (2d Cir. 2022)”); In re Paysafe Sec. Litig., 2025 WL 1003322, at *32 (S.D.N.Y. Mar. 31, 2025) (“Scheme liability arises when defendants engage in deceptive conduct in conjunction with deceptive statements. See Lorenzo v. SEC, 587 U.S. 71, 78–82 (2019). To state a claim for scheme liability, a plaintiff must present facts showing (1) that the defendant committed a deceptive or manipulative act, (2) in furtherance of the alleged scheme to defraud, (3) with scienter, and (4) reliance.” (citations omitted)); Okla. Firefighters Pension and Ret. Sys. v. Musk, 779 F. Supp.3d 396, 418-19 (S.D.N.Y. 2025) (“The Second Circuit has held that “misstatements and omissions can form part of a scheme liability claim, but an actionable scheme liability claim also requires something beyond misstatements and omissions, such as dissemination” (citing Rio Tinto, supra, 41 F.4th at 49 (emphasis in original); noting defendants argued that Musk’s failure to disclose his ownership stake was an omission not actionable under Rule 10b-5 and that by invoking scheme liability “Plaintiff is attempting and end-run around Rule 10b-5(b),” but that the court need not decide whether dissemination alone led to liability because defendants had engaged in other acts to perpetuate the scheme).
[21] See Macquarie, 601 U.S. at 258 (“the failure to disclose information required by Item 303 can support a Rule 10b-5(b) claim only if the omission renders affirmative statements made misleading.”); see also In re Sotera Health Co. Sec. Litig., 2025 WL 1648942, at *33 (E.D. Mich. Mar. 19, 2025) (similar).
[22] 15 U.S.C. §77l(a)(2).
[23] See, e.g., In re SVB Fin’ Grp. Sec. Litig., 2025 WL 1676800, at *14 (N.D. Cal. June 13, 2025); In re Sotera, 2025 WL 1648942, at *37.
[24] See, e.g., In re Dentsply Sirona, Inc. Sec. Litig., 665 F.Supp.3d 255, 288-89 (E.D.N.Y. 2023) (discussing claims for violations of Item 303 under Section 11 and 12(a)(2) together).
[25] Stratte-McClure, 776 F.3d at 104; see also id. at 99 (noting Panther Partners and Litwin “held that Item 303 may provide a basis for disclosure obligations under Sections 11 and 12(a)(2)”).
[26] See, e.g., J & R Mktg. v. Gen. Motors Corp., 549 F.3d 384, 392 (6th Cir.2008); Silverstrand Invs. v. AMAG Pharm., Inc., 707 F.3d 95, 102-03, 107 (1st Cir.2013).
[27] Here, Stratte-McClure may have a point. NVIDIA sought to distinguish Steckman and Section 12(a)(2) from Section 10(b) cases by stating that (i) “as we acknowledged in Steckman…, ‘Section 10(b) of the Exchange Act … differs significantly from Sections 11 and 12(a)(2) of the Securities Act.,” and (ii) “[l]iability under Sections 11 and 12(a)(2) of the Securities Act may arise from ‘omitt[ing] to state a material fact required to be stated.’ See 15 U.S.C. §§77k(a), 77l(b).” But Steckman had said Section 10(b) “differs significantly” from Section 12(a)(2) because Section 10(b) “has only an implied right of action,” while Sections 11 and 12(a)(2) “have express rights of action”—it was not suggesting that the disclosures provisions of Section 10(b)/Rule 10b-5 and Section 12(a)(2) were not similar. See Steckman, 143 F.3d at 1296. More significantly, in its quote, NVIDIA cuts off the rest of Section 12(a)(2)’s language, which goes on to say that a defendant is liable if he/she “omits to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading.”
[28] See In re Sotera, 2025 WL 1648942, at *37-39 (treating Section 11 and 12(a)(2) claims together, including allegations of Item 303 violations thereunder, without distinguishing the statutory language of each, but holding allegations were insufficient under both sections).
[29] See also Ikanos Commun’s, 681 F.3d 114, 120 (2d Cir. 2012) (noting the interrorem nature of the liability [Sections 11 and 12(a)(2)] create”); In re Sotera, supra note 28, 2025 WL 1648942, at *37-39.
[30] See Medina v. Tremor Video, Inc., 640 Fed. Appx. 45, 48 (2d Cir. 2016) (stating in Section 11 case that “our precedents require allegations of specific facts from which we could draw the ‘plausible inference’ that defendants had actual knowledge of the trends or uncertainties at the time the registration statement was issued.”); Iowa Pub. Emps.’ Ret. Sys. v. SAIC, Inc., 818 F.3d 85, 95 (2d Cir. 2016) (same, in Section 10(b) case); see also Yi Xiang v. Inovalon Holdings, Inc. 254 F.Supp.3d 635, 643-44 (S.D.N.Y. 2017) (plaintiffs’ “allegation regarding the Deloitte news [sent to defendants] alert distinguishes this case from Medina, where plaintiffs relied purely on public information to allege that defendants had actual knowledge. The Deloitte news alert was a targeted e-mail sent to the Defendants that would have informed them about the tax change. The Court finds that these allegations give rise to a plausible inference that Defendants had actual knowledge as required by Item 303.”); In re Sotera, 2025 WL 1648942, at *39 (similar); Lilien v. Olaplex Holdings, Inc., 765 F.Supp.3d 993, 1018 (C.D. Cal. 2025) (similar). Most, though not all, courts have concluded that Item 105 also requires disclosure of only risks known to the issuer. Lian v. Tuya Inc., 2024 WL 966263, at *9 (S.D.N.Y. Mar. 5, 2024) (citing cases going both ways).
[31] See Local #817 IBT Pension Fund v. XPO Logistics, Inc., 2022 WL 2358414, at *4 (2d Cir. June 30, 2022) (finding, in Section 10(b) case postdating Medina, that, where “Plaintiffs do not argue that Defendants had actual knowledge of a duty to disclose” under Item 303, “[t]he issue is … whether, accepting Plaintiffs’ well-pleaded factual allegations as true, those facts give rise to a strong inference that Defendants were subject to a duty to disclose so obvious that the failure to disclose was a ‘highly unreasonable’ and ‘extreme departure from the standards of ordinary care.’”); see also Jianpu, 2020 WL 5757628, at *10 (stressing that pleading “known” facts for purposes of Item 303 under Section 11 is not as exacting as pleading scienter, which is not required under Section 11, but without articulating a standard).
[32] Medina, 640 Fed. Appx. at 48; Ikanos Commun’s, 681 F.3d at 121; Jianpu, 2020 WL 5757628, at *10 (although complaint did not allege that “‘any of the [D]efendants … engaged in intentional or reckless misconduct or acted with fraudulent intent,’” Item 303 knowledge allegations sufficed where inference of knowledge was “plausible”); In re CPI Card Grp. Inc. Sec. Litig., 2017 WL 4941597, at *4 (S.D.N.Y. Oct. 30, 2017) (noting that “[b]ecause plaintiffs are proceeding under strict liability and negligence theories, rather than asserting fraud, the heightened pleading requirement of Rule 9(b) … and the [PSLRA] do not apply,” Item 303 knowledge requirement satisfied where such knowledge was “reasonable to infer” and “plausible” from the facts alleged); Inovalon, 254 F. Supp. 3d at 643-44 (same).
