In a matter of first impression, a U.S. Court of Appeals for the Ninth Circuit panel in Pirani v. Slack Technologies, 13 F.4th 940 (9th Cir. 2021), wrestled with its own prior holding that a plaintiff bringing a claim under Section 11 of the Securities Act of 1933 must have purchased a security issued under a specific registration statement and its concern that, in a direct listing, it may be impossible for any plaintiff to ever know, or prove, that the shares he purchased were among the shares formally registered through the company's registration statement as opposed to other unregistered shares. In deciding that an investor purchasing through a direct listing could establish standing under Section 11, the Ninth Circuit departs from past precedent and abandons the previously strict tracing requirement courts have historically interpreted under Section 11.

Section 11 of the Securities Act of 1933

Section 11 establishes a private cause of action that exists only for persons "acquiring such security" sold through the registration statement which contains false or misleading information. To prevail on a Section 11 claim, a plaintiff must establish that a defendant is a signer of a registration statement or a director of the issuer or an underwriter for the offering, the plaintiff purchased the registered securities, and any part of the registration statement for the offering contained an untrue statement of a material fact or omitted a material fact necessary to make the statements not misleading. There is no requirement of scienter (intent), reliance, or causation. Accordingly, Section 11 broadly imposes strict liability on an issuer, its directors and officers for any material, untrue statement of fact, or omission in the registration statement.