Macquarie Infrastructure Corp. v. Moab Partners, L. P.
The Supreme Court ruled unanimously that a company cannot be sued by private investors under the main federal securities fraud rule — Rule 10b-5(b) — for simply failing to disclose required information; there must also be a misleading statement that the missing information would have corrected.
The decision resolves a split among federal appeals courts and narrows the legal theory available to investors in securities fraud suits, though companies can still be pursued by the SEC and investors can still sue over omissions that make a company's existing statements misleading.
“the difference between a pure omission and a half-truth is the difference between a child not telling his parents he ate a whole cake and telling them he had dessert.”
The Court's memorable illustration of the line between complete silence and a misleading incomplete statement.
How it got here: A federal district court dismissed the investors' lawsuit; the Second Circuit reversed; the Supreme Court agreed to hear the case to resolve a conflict among the federal appeals courts.
The Case in Depth
What happened
Macquarie Infrastructure Corporation operated large liquid storage terminals, including facilities that held No. 6 fuel oil — a high-sulfur product whose use in shipping was set to be sharply restricted by a 2020 international regulation (IMO 2020). Macquarie never mentioned IMO 2020 in its public filings. When it later announced a drop in storage contracts tied in part to the No. 6 fuel oil market decline, its stock fell 41%. A group of investors sued, arguing that Macquarie was required under an SEC rule called Item 303 to have disclosed the IMO 2020 risk all along.
The question before the Court
Can investors sue a company under federal securities fraud law for simply failing to include required disclosures in SEC filings, even when the company never made a misleading statement about that topic?
The Court's answer
No — the Court held that simply failing to disclose information required by Item 303 cannot support a private lawsuit under Rule 10b-5(b) unless the omission also renders some existing statement misleading. Rule 10b-5(b) only prohibits omitting facts needed to keep "statements made" from being misleading — meaning some affirmative statement must already exist before the omission rule is triggered. A company that says nothing at all about a topic has made no "statement" that the missing information would correct, so it has not violated this particular rule no matter how significant the omitted information was.
The Court distinguished this "pure omission" from a "half-truth," where a company says something true but leaves out critical information that makes the statement misleading. Half-truths remain fully actionable. Investors can still sue when Item 303 violations create misleading half-truths, and the SEC retains independent authority to enforce its own disclosure rules against companies that omit required information entirely.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Public companies that stay completely silent on a required disclosure topic cannot be sued by private investors under Rule 10b-5(b) — only the SEC can pursue those bare omissions. Investors who want to bring a private fraud claim must now point to a specific misleading statement made worse by what was left unsaid, making many securities class actions harder to bring and sustain.
What changes now
The case returns to the Second Circuit, which must reconsider whether Macquarie made affirmative statements that were rendered misleading by omitting the IMO 2020 risk — a "half-truth" theory the Court did not address. If the investors can identify such statements, their lawsuit may survive on remand. For securities litigation nationwide, companies and plaintiffs must now assess claims under this clarified standard: bare omissions alone will not carry a private Rule 10b-5(b) suit.
What this does not decide
The Court explicitly left open what counts as "statements made," when a statement becomes a misleading half-truth, and whether other parts of Rule 10b-5 — subsections (a) and (c) — might support liability for pure omissions. Those questions remain unresolved for future cases.
How the Court got there
The legal reasoning, step by step
- The central textual question was what Rule 10b-5(b) actually prohibits. The Rule bars omitting facts necessary 'to make the statements made … not misleading.' The phrase 'statements made' is load-bearing: it requires identifying some prior affirmative assertion before asking whether additional facts were needed to complete it. Without any statement on a topic, there is no 'statement made' that silence can render misleading.
- The Court drew a sharp line between a 'pure omission' — a company saying nothing at all about a subject — and a 'half-truth,' which is a statement that is technically accurate but misleading because it leaves out critical qualifying information. Only half-truths involve 'statements made' and therefore only half-truths fall within Rule 10b-5(b)'s prohibition. The Court illustrated this: telling your parents you 'had dessert' while hiding that it was the whole cake is a half-truth; simply never mentioning the cake at all is a pure omission.
- The broader statutory structure confirmed the text's meaning. Section 11(a) of the Securities Act of 1933 explicitly creates liability for omitting facts 'required to be stated' in a registration statement — language that covers complete silence on a required subject. Congress used no similar language in Section 10(b), and the SEC used none in Rule 10b-5(b). This deliberate gap signals that pure omissions were not meant to be actionable under the securities fraud provisions.
- Even a regulatory duty to disclose — like the one Item 303 imposes — does not automatically convert silence into a misleading statement under Rule 10b-5(b). A duty to speak and actual fraudulent conduct are distinct: Rule 10b-5(b) targets fraud, not disclosure failures standing alone. Accepting the investors' theory would effectively read 'statements made' out of the Rule and turn a fraud provision into a general disclosure enforcement tool.
- The Court rejected the argument that investors could treat every company as implicitly representing that it had complied with all Item 303 obligations. That theory would render the 'statements made' language superfluous and duplicate the pure-omission liability Congress created elsewhere but not in the fraud provisions. The Court also noted that investors and the SEC still have meaningful remedies: private suits over misleading half-truths remain available, and the SEC may enforce Item 303 violations directly.
Doctrinal impact
Cases affected by this decision
Reaffirms Basic Inc. v. Levinson (485 U.S. 224)
The Court reaffirms that silence, without a duty to disclose, is not misleading under Rule 10b-5.