I Should Note That This Supremes Decision Means A LOT LESS… That Some Will Say It Does: On Securities Law Liability, For “Pure Silence”

There will doubtlessly be some commentators who will say this is a big shift in the federal securities law jurisprudence announced this morning.

It isn’t. [In fact, it is not even worth naming the case. And to be clear, this is a defense Elizabeth Holmes tried to put forward — but she had created affirmative duties to disclose for herself, when speaking to her investors, because she had previously openly lied about so many of these material matters — like whether the device even worked. Smile.]

This new case merely holds that one may remain silent, where no special circumstances require affirmative speaking — speaking, to make the other statements made, not misleading by omitting context.

That’s all it holds. If someone buys a security without any disclosures, from someone else, without asking any questions, and without a disclosure document (in an exempt transaction, for example), there can be no 10b-5(b) liability — due to the failure of the buyers’ diligence.

Unsurprising, and that’s been understood to be the well settled law — for at least four decades. Since I practice M&A in the life sciences, this all comes up pretty often. Now you know. Onward, into the sunshiny Friday air.

Smile.

नमस्ते