On June 1, the U.S. Supreme Court issued a unanimous decision in Slack Technologies v. Pirani, holding that plaintiffs suing under Section 11 of the Securities Act of 1933 must establish that they bought shares registered under the registration statement that allegedly contained false or misleading statements. The court's opinion endorses a large body of lower court authority that had come to the same conclusion, and it also makes clear that this tracing requirement applies with full force to Section 11 suits arising from "direct" listings. But the court left it to the U.S. Court of Appeals for the Ninth Circuit to determine whether the plaintiff's complaint can satisfy Section 11 "as properly construed" and declined to answer whether Section 12 contained a similar requirement.

Background

The 1933 Act "requires a company to register the securities it intends to offer to the public with the Securities and Exchange Commission" and, in connection with these public offerings of registered securities, requires companies to "prepare a registration statement" and prospectus "includ[ing] detailed information about the firm's business and financial health so prospective buyers may fairly assess whether to invest." Section 11 of the 1933 Act permits "any person acquiring such security" to sue certain enumerated parties for material misstatements or omissions in "any part of the registration statement." 15 U.S.C.Section 77k(a). And Section 12(a)(2) of the 1933 Act makes anyone who "offers or sells a security … by means of a prospectus" that contains a material misstatement or omission "liable … to the person purchasing such security from him." 15 U.S.C. Section 77l(a)(2).