’Envy of the World’: Equity Markets and the Compelling Need for Robust Disclosure Under Regulation S-K

Olshan litigation partner John Moon and Chair of Litigation Lori Marks-Esterman authored an article in New York Law Journal, with assistance from litigation associate Daniel Stone, entitled “’Envy of the World’: Equity Markets and the Compelling Need for Robust Disclosure Under Regulation S-K.” In the article, John, Lori and Daniel discuss how courts have traditionally recognized that investors’ faith in the accuracy of issuer statements is central to investor confidence and the securities market. Investor confidence protects against price shocks and ensures ongoing market stability. However, the authors point to an April 2024 Supreme Court decision that held that an issuer’s omission of a known material trend cannot alone support a claim for securities fraud. “The court reasoned that only ‘half-truths’ are actionable, whereas ‘pure omissions’ are not,” they write. “While an incomplete disclosure of known trends can support a claim of securities fraud, leaving out all known trends is immune from private suit.” The authors note that former senior leaders of the SEC support a private right of action for “pure omissions” to complement SEC enforcement efforts. “Certainly, diligent investors and creative securities lawyers will still discover misleading half-truths from unscrupulous issuers,” they write. “More importantly, the Supreme Court’s decision creates unfortunate uncertainty, as well as externalities, in our capital markets by immunizing issuers who omit known risks entirely.”