Supreme Court Decides When Statements of Opinion Can Trigger Section 11 Liability

March 27, 2015

On Tuesday, the U.S. Supreme Court set the standards for when a company’s statements of opinion (such as “we believe that…”) in a registration statement are subject to liability under Section 11 of the Securities Act. In Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, the Court ruled that a company cannot be liable under Section 11 for a statement of opinion that it believed to be true when made, even if its opinion turns out to be incorrect. However, the Court held that a company could be liable for a statement of opinion if it is shown that a company omitted key information about whether the basis for its opinion was reasonable. According to the Court, Section 11 is not “an invitation to Monday morning quarterback an issuer’s opinions.” Read the Supreme Court’s opinion.

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