Plaintiffs are increasingly focusing their securities litigation claims on risk-factor disclosures in Securities and Exchange Commission filings. In the wake of some recent decisions from the 9th U.S. Circuit Court of Appeals in this area, those charged with preparing risk factor disclosures should pay special attention to updating risk factor and cautionary language to make sure that disclosures do not describe risks in hypothetical terms when the risks are alleged to have been actually occurring or to have occurred at the time.
The 9th Circuit’s decision in In re Facebook, Inc. Sec. Litig., 87 F.4th 924 (9th Cir. 2023), is the latest case where the 9th Circuit has upheld complaints of securities fraud against public companies facing securities litigation based on risk disclosure statements held to be misleading by omission.
The Facebook case arises out of the improper harvesting of personal data from millions of Facebook users by Cambridge Analytica. Facebook shareholders filed a securities class action against Facebook and certain of its officers. The plaintiffs alleged that Facebook made statements that were materially misleading by failing to disclose Cambridge Analytica’s improper harvesting.
For further information, please contact:
Mark R.S. Foster, Partner Skadden
mark.foster@skadden.com
