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Spotlight

Supreme Court Hears Argument on Traceability Requirement in Circuit-Split Slack v. Pirani

Key Points

• Before the end of June, the U.S. Supreme Court is expected to issue a decision in a high-profile securities case that could have broad implications for whether and how plaintiffs can assert Section 11 and 12(a)(2) claims if they purchased securities offered to the public in a direct listing as opposed to a traditional initial public offering (IPO).
• At oral argument, some of the justices expressed concern that the SEC had not weighed in on the issues and focused on the paucity of case law addressing Section 12 claims.
• The Court alluded to the possibility that it would “split the baby” and rule on the traceability issue with respect to Section 11, but remand on the Section 12(a)(2) issue.

Introduction

The U.S. Supreme Court will likely decide in the next month whether plaintiffs asserting claims under Sections 11 and 12(a)(2) of the Securities Act must show that they purchased shares registered under the registration statement that they claim to be misleading. Section 11 of the Securities Act provides that when any part of a registration statement contains a material misstatement or omission, “[a]ny person acquiring such security” shall have an express right of action. 15 U.S.C. § 77k(a). Section 12(a)(2) provides that “any person who … offers or sells a...

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