Federal securities laws prohibit fraud in the sale of securities (i.e., stocks and bonds) and authorize private lawsuits for damages against the perpetrators of such fraud. In Macquarie Infrastructure Corp. v. Moab Partners, decided on April 12, 2024, the Court held that a plaintiff’s allegation of a stock seller’s “pure omission” from a required disclosure about the stock does not state a sufficient claim for securities fraud in a private lawsuit based upon federal securities laws.
In the case under consideration, the stock seller failed to mention anything in its required public disclosures about a new environmental standard for fuel oil storage that had been issued by the United Nations. The new standard could reasonably be expected to impair the future value of the seller’s stock. The Court held that the seller’s absolute omission of any of those facts from its required disclosures to potential buyers would not establish the kind of fraud prohibited by federal securities laws. Those anti-fraud laws, according to the Court, did not prohibit the bare omission of information that a buyer would find relevant to his or her decision.
COMMENT: The Court accurately read both the letter, and the spirit (the purpose) of federal securities fraud laws. The decision of the Court, and its interpretation of the law, were unanimous.
Dan Rhea
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