Duty or No Duty? That Is the Question: The Second Circuit Reasserts That a Violation of Item 303's Duty to Disclose Can Establish Liability Under Section 10(b)

Abstract

On March 29, 2016, in Indiana Public Retirement Systems v. SAIC, Inc., the United States Court of Appeals for the Second Circuit reaffirmed its earlier conclusion that a violation of the duty to disclose imposed on publicly traded companies by Item 303 of Regulation S-K can constitute a violation of Section 10(b) of the Securities Exchange Act of 1934. In so doing, the Second Circuit directly conflicted with a decision from the United States Court of Appeals for the Ninth Circuit, Cohen v. NVIDIA Corp. (In re NVIDIA Corp. Securities Litigation), despite the fact that both courts relied upon the Third Circuit’s Oran v. Stafford opinion in reaching their decisions. This Comment argues that a violation of Item 303 can constitute a violation of Section 10(b), and, further, that the Second Circuit adopted the correct approach because it faithfully construed the underlying regulation and statute, correctly followed earlier jurisprudence, and furthered, not frustrated, the principal goals of the federal securities laws.