U.S. Supreme Court “Material”: Item 303 Circuit Split

Item 303 of Regulation S-K imposes obligations on companies filing reports mandated by the Securities and Exchange Commission (SEC) to disclose certain risk-related information. This duty is forward-looking and includes known trends or uncertainties reasonably expected to have a material unfavorable impact on the entity’s future revenues or income. Item 303, however, provides no private right of action.

 

Searching for redress, investors alleging a loss as a result of an Item 303 violation have asked if a company’s failure to comply with Item 303 can create liability under SEC Rule 10b-5. If liability does attach, regulated entities are left to reevaluate the outer limits of their disclosure obligations.

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