Macquarie Infrastructure Corp. v. Moab Partners, L. P.
The Supreme Court unanimously ruled that a company cannot be sued for securities fraud simply because it stayed silent about something an SEC regulation required it to disclose — the silence must have made some actual prior statement of the company misleading.
The decision resolves a split among federal appeals courts and narrows the reach of securities fraud class actions, making clear that the anti-fraud rule at the heart of most investor lawsuits targets deception, not every instance of required-but-missing disclosure.
How it got here: A federal trial court dismissed the investors' complaint; the Second Circuit reversed; the Supreme Court agreed to hear the case to resolve a split among federal appeals courts.
The Case in Depth
What happened
Macquarie Infrastructure Corporation owned a subsidiary that stored bulk liquid commodities, including a high-sulfur fuel oil widely used in shipping. In 2016, a United Nations shipping agency adopted a rule capping the sulfur content of ship fuel beginning in 2020 — a change that effectively threatened to wipe out much of the market for Macquarie's product. Macquarie never mentioned this rule in its public filings. In early 2018, the company disclosed a business decline linked to that fuel oil market, and its stock price fell about 41%. Investors sued, arguing Macquarie should have disclosed the shipping rule years earlier.
The question before the Court
Can investors sue a company for securities fraud based solely on the company's failure to disclose information required by an SEC regulation, even when that silence didn't make any prior statement misleading?
The Court's answer
No. The Court ruled that a company's failure to include information required by an SEC disclosure regulation — standing alone — cannot be the basis for a private securities fraud lawsuit. The anti-fraud rule at issue, Rule 10b-5(b), prohibits leaving out facts that make "statements made" misleading. Because that language requires an existing affirmative statement before asking what else needs to be said to keep it accurate, the rule covers so-called "half-truths" (saying something true but leaving out critical qualifying details) — not "pure omissions," where a company simply says nothing at all.
The Court pointed to a deliberate contrast in federal law: a separate securities statute, Section 11(a) of the Securities Act of 1933, explicitly creates liability for failing to include facts "required to be stated." Congress wrote no such language into the anti-fraud provision or its implementing rule, and the Court said that gap is meaningful. Investors who believe an omission distorted an actual company statement can still sue, and the SEC can still bring its own enforcement action for any failure to meet disclosure requirements.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Companies facing securities fraud class actions can no longer be held liable under the main anti-fraud rule just because they skipped a required regulatory disclosure — investors must also identify specific company statements that the silence made misleading. The SEC, however, retains full power to pursue companies directly for failing to meet disclosure obligations, and private suits remain available when silence does distort a prior statement.
What changes now
The Second Circuit's ruling is vacated and the case is sent back for reconsideration under the correct legal standard. On remand, the investors will need to identify specific statements Macquarie made that were rendered misleading by its failure to disclose the shipping regulation — a harder bar than the Second Circuit applied. Other pending securities cases in courts that had allowed pure-omission claims will likely be reconsidered in light of this ruling.
What this does not decide
The Court explicitly left open what counts as "statements made," how courts should decide when an omission makes a statement misleading as a half-truth, and whether the other parts of the same rule — Rule 10b-5(a) and 10b-5(c) — might independently support liability for pure omissions. These questions remain for lower courts.
How the Court got there
The legal reasoning, step by step
- The Court began with the text of Rule 10b-5(b), which prohibits omitting a material fact necessary 'to make the statements made . . . not misleading.' The phrase 'statements made' does real work: before asking what else needs to be said to avoid misleading investors, there must first be an affirmative statement — something the company actually said.
- The Court drew a sharp distinction between two types of omissions. A 'pure omission' happens when a company says nothing at all about a subject, so its silence carries no special meaning. A 'half-truth' is when a company says something accurate but leaves out critical qualifying details that change the picture. Rule 10b-5(b), by its terms, covers half-truths — not pure omissions.
- The Court compared Rule 10b-5(b) to Section 11(a) of the Securities Act of 1933, which explicitly creates liability for omitting 'a material fact required to be stated' in a registration statement — a pure-omission standard. Because Congress and the SEC deliberately omitted that kind of language from Section 10(b) and Rule 10b-5(b), the Court treated that gap as intentional and telling.
- The investors and the government argued that because sophisticated investors know the SEC requires companies to disclose known trends and uncertainties, a company's silence on such matters is itself misleading. The Court rejected this: adopting it would erase the 'statements made' requirement from the rule and convert an anti-fraud provision into a general disclosure mandate, shifting the focus from deception to mere failure to report.
- The Court addressed the investors' concern that its ruling would leave them without recourse. Private lawsuits remain available whenever an Item 303 omission makes an actual company statement misleading (a half-truth claim). And the SEC retains full authority to investigate and prosecute companies that violate its own disclosure regulations, including Item 303.
Doctrinal impact
Cases affected by this decision
Reaffirms Basic Inc. v. Levinson (485 U. S. 224)
Silence without a duty to disclose is still not misleading under Rule 10b-5, and even a duty to disclose does not automatically make silence fraudulent.
Reaffirms Matrixx Initiatives, Inc. v. Siracusano (563 U. S. 27)
Section 10(b) and Rule 10b-5(b) create no general affirmative duty to disclose all material information.
Reaffirms Chiarella v. United States (445 U. S. 222)
Section 10(b) is an anti-fraud provision; what it covers must be fraud, not mere failure to disclose.