Supreme Court decision says directors can speak freely
Corporate officers and directors can express their honestly held opinions without liability under Section 11 of the Securities Act of 1933even if those opinions later turn out to be falseso long as they believed those opinions to be true at the time they said it.
May 27, 2015 at 08:00 PM
4 minute read
The Supreme Court recently gave corporate directors and officers some welcome relief. The Court confirmed that corporate officers and directors can express their honestly held opinions without liability under Section 11 of the Securities Act of 1933—even if those opinions later turn out to be false—so long as they believed those opinions to be true at the time they said it (with some caveats, of course).
In the March issue of InsideCounsel, I wrote about Omnicare, Inc. v. Laborers District Counsel Construction Industry Pension Fund. At that time, we didn't know how the Supreme Court would rule, but we were prepared for it to potentially disrupt the status quo when it came to statements made under Section 11.
As a reminder, Omnicare, a pharmacy service for long-term care facilities, made certain claims regarding its legal compliance in the registration statement for its initial public offering (IPO). After the IPO, serious allegations surfaced about alleged illegal activities, such as kickbacks and the falsification of Medicare and Medicaid claims.
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