The upcoming Supreme Court of the United States (“SCOTUS”) term may include four cases involving securities law. The Court is still adding cases to its docket and deciding on petitions for certiorari.
This may mean forthcoming changes in securities law depending on how the justices decide the upcoming cases. Up for consideration are issues surrounding the applicability of Section 11 of the Securities Act of 1933, prosecution of insider trading, and disgorgement in SEC enforcement actions. Below are some highlights of the upcoming cases.
Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund
One of the cases SCOTUS will hear this term involves stock registration statements, which are documents that a company must file with the SEC before a public offering. Specifically, the Court will examine the pleading standard for a case where a plaintiff asserts a claim against stock issuers for a false statement that was made on a registration statement when it involves a matter of opinion. The lower courts have reached decisions that are not uniform in their standards, and the SCOTUS decision may clarify the pleading standard.
Whitman v. United States
It is unclear whether the Court will grant the petition for certiorari in this matter, which deals with prosecution for insider trading under section 10(b) of the Securities Exchange Act. One question presented relates to whether the inside information had to be a “significant factor” in the defendant’s decision to buy or sell or whether “knowing possession” of inside information is enough to criminally convict someone of insider trading. Other questions involve the element of fiduciary duty and the admissibility of certain witness testimony in a criminal trial.
There is a petition for certiorari pending for this case, so it is unclear whether the Court will hear it this term. The question in this case concerns whether or not a plaintiff can assert a Section 11 claim for false statements on a registration statement during a merger “lock-up” agreement. Under these circumstances, the plaintiff would have agreed to the merger before the registration statement was issued, meaning the plaintiff couldn’t have based the investment decision on the registration statement.
Teo v. SEC
This case involves disgorgement of profits in an SEC civil enforcement action. Specifically, the question relates to whether a court can order a defendant to disgorge (give up) profits that the defendant didn’t earn as a result of their violations of securities laws but from an unrelated and intervening event.
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