Supreme Court Limits, But Does Not Reject, Securities Liability for Statements of Opinion in Registration Statements
In a highly anticipated securities law ruling, the Supreme Court yesterday overturned a controversial Sixth Circuit Court of Appeals ruling that held that an opinion in a securities registration statement can be the basis of liability if that opinion ultimately proves to be incorrect. The case, Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, involved claims by investors in Omnicare, a pharmacy services company, brought under Section 11 of the Securities Act of 1933, which governs liability for untrue statements of fact or omissions of material fact contained in an issuer’s registration statement. The Supreme Court held that statements of opinion cannot be actionable under Section 11 merely because they ultimately prove to be incorrect. Rather, statements of opinion will be actionable only if the issuer (1) subjectively disbelieved the opinion; (2) stated supporting facts that were false; or (3) omitted to state a specific material fact indicating that the issuer lacked a reasonable basis for its opinion.
The Supreme Court’s decision eliminates uncertainty concerning the use of opinions in registration statements. Where issuers include opinions in their registration statement, they should do so with a view to completely and accurately disclosing truthfully held beliefs and the basis of their opinions, and should include disclaimers or other qualifying language where appropriate.
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