Most people have no interest in this. The implications of how this will touch their lives and well-being if this agenda is allowed to proceed unchallenged…. Are LOST on most every soul I know.
This has to do with the destruction of the “Rule Of Law” in the United States. The long held understanding of what is and is not permitted under federal securities statutes/laws…. Is being changed by Court decisions.
Fitts talked about this last night. Less experienced investment bankers have traditionally been schooled by their employer about activities said to be illegal. Violation carries civil and/or criminal charges against the corporation and the players who break the law….. as written in the statutes and as interpreted by the courts. Securities Acts of 1933 and 1934….
https://federal-lawyer.com/securities-litigation/sec-fraud-defense/criminal-violations/
IF a firm, or a member of the team putting together an initial offering of initial stock (the prospectus), or updating the corporate filings required by the Securities and Exchange Commission (SEC)…. If there is a “material omission” about anything known to anyone in the group, that might affect the price of the stock down the road…. This MUST be revealed to prospective investors. In other words, reveal the known risks of what you are investing in; possible windfalls are also required to be reported. Failure to do this could get you sued or criminally indicted.
When I was a litigation paralegal at Ballard Spahr in the 1970’s, I worked on civil securities fraud lawsuits. Specifically, violation of 10(b)(5) cases. Shareholders who lose money get pissed off and sometimes sue because the company failed to disclose a known risk. In law firms, all lawyers who recently billed time to a company must sign off on “The Audit Letter”. The lawyer preparing the company SEC filings reviews the comments and sign-offs on The Audit Letter, and determines what must be reported as a material issue in the filing.
Well, a federal court just ruled that an omission is not illegal under 10(b)(5) of the Securities Act. https://www.morganlewis.com/pubs/2024/04/us-supreme-court-holds-pure-omissions-not-actionable-under-10b-of-securities-exchange-act-resolving-circuit-split
“In a blow to the plaintiffs’ securities bar, the US Supreme Court in Macquarie Infrastructure Corp. v. Moab Partners unanimously held that a “pure omission”—the failure to disclose information in the absence of an inaccurate, incomplete, or misleading statement—cannot give rise to liability under Section 10(b) of the Securities Exchange Act of 1934 or Rule 10b-5 thereunder, even where there is an affirmative regulatory duty to disclose the omitted information.”
WTF?
It sound like that if a huge risk is not mentioned in any way in the SEC filing, then it OK to say nothing about it. Am I reading this right? But once you mention an issue in a filing, you are required to report any change in the situation in future filings. So best to say nothing at all. But one clarification must be made: this new ruling cannot be applied to 11(a) violations, which pertain to the issuance of new stock, i.e., Registration Statements”. Only 10(b)(5) violations are impacted by this new definition of what is legal.
So all you investors in the U.S. Stock Market, good luck to you. When you don’t know the whole situation about your investment’s business prospects, it’s tough to make an intelligent decision about whether or not to buy. Or sell! (But the “insiders” know. Lawyers and others working an a stock issue or a merger are typically banned from trading stock in the companies involved in the deal. So are company “insiders” who know more than the public.)
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