General climate

Describe the nature and extent of securities litigation in your jurisdiction.

Securities litigation is very active in the United States, both in terms of the number of cases filed and the size of cases. In 2017, 432 new federal securities class actions were filed - the highest number since the downturn in the technology industry in 2001. The vast majority of such cases are dismissed or settled before trial. Between 2000 and 2017, around 38 per cent of cases in which a motion to dismiss was filed were dismissed with prejudice. Of those cases that do settle, around 60 per cent are for US$10 million or less, and around 8 per cent are for US$100 million or more, with the rest in between (see NERA, Recent Trends in Securities Class Litigation: 2017 Full-Year Review). In June 2018, the district court approved a securities class action settlement by which the Brazilian oil company Petrobras has announced a securities class action settlement in which it agreed to pay US$2.95 billion, which, if approved, would represent the largest settlement ever by a foreign corporation in a US action. In addition to class actions, hundreds of individual securities cases are filed each year.

The major pieces of securities legislation in the United States are the Securities Act of 1933 (the 1933 Act) and the Securities Exchange Act of 1934 (the 1934 Act). The 1933 Act regulates the initial offering and distribution of securities, while the 1934 Act regulates securities trading in securities markets.

The 1933 and 1934 Acts were enacted in the wake of the stock market crash of 1929. Seeking to remediate the problems ailing the industry, Congress undertook a series of investigations into how securities were bought and sold in the United States. These investigations prompted Congress to enact the 1933 and 1934 Acts to promote truthfulness and disclosure in securities markets.

By 1995, Congress believed that too many meritless securities claims were being brought. As a result, it passed the Private Securities Litigation Reform Act (PSLRA), which makes it more difficult to plead securities fraud in private actions and postpones discovery in most securities cases. In 1998, Congress enacted the Securities Litigation Uniform Standards Act (SLUSA), which pre-empts most large state law fraud claims arising from the sale of a security. Despite these reforms, securities litigation remains very active.

Available claims

What are the types of securities claim available to investors?

Plaintiffs can bring both federal and state law claims. Federal claims are more common and important.

The most common federal securities claim is a Rule 10b-5 claim. Rule 10b-5 was promulgated by the Securities and Exchange Commission (SEC) pursuant to section 10(b) of the 1934 Act. Rule 10b-5 broadly prohibits fraud or deceit in connection with the purchase or sale of a security. It can be enforced either by the SEC or by private plaintiffs. Although there is no express private enforcement mechanism, courts have found that the rule implies a private right of action. The fraud-on-the-market presumption (question 8) allows investors to bring Rule 10b-5 claims on a class basis.

Other common federal law claims include sections 11 and 12 of the 1933 Act and section 18 of the 1934 Act. Section 11 prohibits misstatements in the registration statement of securities. Defendants in a section 11 action may include the issuer, directors, accountants, and others named as experts in the registration statement, such as underwriters. Section 12 prohibits the sale of most unregistered securities and prohibits misstatements in the sale of securities, whether through oral communication or by a prospectus. Section 18 of the 1934 Act provides an express cause of action for investors who are harmed by false or misleading statements made in filings with the SEC.

State securities laws, commonly known as ‘blue-sky laws’, vary considerably. Over 30 states have adopted in full or part a version of the Uniform Securities Act. Almost all blue-sky laws have some form of anti-fraud provision (eg, Uniform Securities Act section 501). New York is the only state without a private right of action for securities fraud in its blue-sky law (known as the Martin Act) (see CPC Int’l Inc v McKesson Corp, 70 NY2d 268, 276-77 (1987); see also Assured Guar (UK) Ltd v JPMorgan Inv Mgmt Inc, 18 NY3d 341, 348 (2011) (holding that the Martin Act does not preclude a private litigant from bringing a non-fraud common law cause of action)).

Although blue-sky laws remain important in individual investor claims, SLUSA precludes a securities claim from being brought under state law or in state court if it is a class action or if damages are sought for more than 50 individuals (see 15 USC section 78bb(f)). Additionally, common law tort claims, such as negligent or fraudulent misrepresentation, are often available to securities plaintiffs outside the class action context.

The focus of this chapter is on Rule 10b-5 and sections 11 and 12.

Offerings versus secondary-market purchases

How do claims arising out of securities offerings differ from those based on secondary-market purchases of securities?

The legislative scheme governing initial offerings is very different from the scheme governing secondary-market purchases of securities.

For initial offerings, sections 11 and 12 prohibit misstatements in registration statements, oral communications, and prospectuses. Sections 11 and 12 create a near strict liability regime for issuers, without the need to prove reliance, causation, or the defendant’s mental state (commonly referred to as ‘scienter’). The damages available for primary-market violations are generally rescissionary in nature, in that they seek to return plaintiffs to the position they would have been in had they never purchased the securities.

For secondary-market transactions, Rule 10b-5 broadly prohibits fraud and misstatements. Under Rule 10b-5, knowledge, causation, and reliance are necessary elements of the claim. The damages available under Rule 10b-5 are somewhat broader than in primary-market transactions, in that plaintiffs can recover their out-of-pocket losses.

Public versus private securities

Are there differences in the claims available for publicly traded securities and for privately issued securities?

This is not a critical distinction in American law. Generally, for the claims discussed in question 2, the basis for a suit is the purchase or sale of a security. The 1933 Act defines ‘security’ broadly, without reference to whether the security is publicly traded or privately issued (see 15 USC section 77b(a)(1)). The Supreme Court has held, however, that privately negotiated sales of stock are not sold by means of a prospectus and, therefore, are not covered by section 12(a)(2) (see Gustafson v Alloyd Co, 513 US 561 (1995)).

Two cautionary notes should be made. First, as discussed in question 8, proving reliance on a misrepresentation under Rule 10b-5 is often easier in the context of a publicly traded security because plaintiffs may utilise the fraud-on-the-market presumption and, therefore, show reliance by proving price impact in a well-functioning market. Second, as discussed in question 30, limitations on the extraterritorial reach of American securities laws may have different effects on publicly and privately issued securities (namely, American courts may not be open to claims based on fraud in the sale of foreign, privately issued securities).

Primary elements of claim

What are the elements of the main types of securities claim?

The elements of a Rule 10b-5 claim are:

  • a material misrepresentation or omission;
  • scienter (ie, knowledge);
  • a connection between the misrepresentation or omission and the purchase or sale of a security;
  • reliance (often referred to as transaction causation in fraud-on-the-market cases);
  • economic loss; and
  • loss causation (a casual connection between the misstatement and the plaintiff’s losses).

The elements of a section 11 claim are:

  • a registration statement that either:
    • contains an untrue or misleading statement of material fact; or
    • omits a fact that is either required by law or necessary to make the registration statement not misleading.

The elements of a section 12(a)(1) claim are:

  • the sale of, or offer to sell, a security;
  • the absence of a registration statement covering the security; and
  • use of an instrument of interstate commerce (such as the US mail system) in connection with the sale or offer.

The elements of a section 12(a)(2) claim are:

  • the sale of, or offer to sell, a security by means of a prospectus or oral communication which misstated a material fact;
  • privity between the buyer and seller; and
  • the use of interstate commerce in connection with the sale or offer.

The elements of a section 18 claim are:

  • a false or misleading statement or omission in a document filed with the SEC;
  • reliance on the misrepresentation;
  • economic loss; and
  • loss causation.

Common law negligent misrepresentation claims may be brought where the defendant made a false statement through negligence in obtaining or communicating information, intending the plaintiff to act on the false statement, resulting in the plaintiff relying on the statement and, therefore, suffering damages. The tort of fraudulent misrepresentation has the same elements but requires knowledge of falsity.


What is the standard for determining whether the offering documents or other statements by defendants are actionable?

As an initial matter, it is important to note the breadth of Rule 10b-5 claims. In the case of publicly traded securities, almost any public statement can be the basis for a Rule 10b-5 claim, as the ‘in connection with’ prong of the rule is very broad. (see, eg, Merrill Lynch, Pierce, Fenner & Smith Inc v Dabit, 547 U.S. 71 (2006)). By contrast, section 18 liability attaches only to statements in SEC filings, section 11 liability attaches only to registration statements for an initial offering, and section 12 liability attaches only to statements regarding an initial offering.

The general rule of actionability is fairly simple - a misrepresentation of fact is actionable if it is material. A statement is material if there is a substantial likelihood that a reasonable investor would consider the information contained in the statement when making an investment decision.

Two special types of statements deserve additional discussion: omissions and opinions. To state a claim for an omission, the plaintiff must show both that the defendant failed to disclose a material fact and that the law created a duty to disclose that fact. The mere possession of non-public information does not create a duty to disclose. A disclosure of part of the truth, however, can create liability for the misleading impression that a partial disclosure may create. When one makes a representation, it must be complete and accurate.

Both opinions and forward-looking projections can be deemed statements of fact. Generally, the only actionable content of such a statement is the implied representation that the statement is made in good faith. For example, in Virginia Bankshares, Inc v Sandberg, 501 US 1083 (1991), the Supreme Court found that a statement that the value of a company is ‘high’ or the terms of a merger are ‘fair’ states a fact that the speaker believed that the value was high or the terms were fair. Therefore, the Court held that liability could attach if, at the time the statement was made, the value of the company was not high or the terms were not fair and the speaker knew it. Most courts have held that Virginia Bankshares applies to all types of securities claims.

Further, in Omnicare, Inc v Laborers District Council Construction Industry Pension Fund, 135 S Ct 1318 (2015), the Supreme Court held that an opinion could form the basis of a claim under section 11 of the 1933 Act if the speaker did not sincerely hold the opinion or if the statement omitted material information and the opinion implied that the speaker had a factual basis for holding the opinion, when the speaker did not. Securities cases around the country are raising questions about how to apply Omnicare, including its application to claims under section 10(b) of the 1934 Act, which contains a scienter element (see, eg, In re Atossa Genetics, Inc Sec Litig, 868 F3d 784, 801-02 (9th Cir 2017) (statement that ‘FDA clearance risk had already been achieved’ was ‘a statement of opinion” but because this statement did not comport with other facts known to the speaker at the time, this opinion statement was ‘misleading by omission’). In Tongue v Sanofi, 816 F3d 199 (2d Cir 2016), a case with claims under both section 10(b) of the 1934 Act and section 11 of the 1933 Act alleging material omissions, the Second Circuit gave a narrow interpretation to opinion liability, and held that issuers ‘need not disclose a piece of information merely because it cuts against their projections’.

In the PSLRA, Congress codified protection for forward-looking statements (see 15 USC section 78u-5). The PSLRA ‘safe harbor’ applies when a forward-looking statement is cloaked in meaningful cautionary language or the plaintiff fails to show that the statement was made with actual knowledge of its falsity. In such situations, liability will not attach.


What is the standard for determining whether a defendant has a culpable state of mind?

Rule 10b-5 claims require a showing of intentional or knowing misconduct (‘scienter’). In a number of cases, most recently Matrixx Initiatives Inc v Siracusano, 563 US 27, 48 (2011), the Supreme Court has declined to decide whether extreme recklessness suffices to fulfil the scienter requirement. Most circuit courts have found that extreme recklessness is sufficient (see Tellabs, Inc v Makor Issues & Rights, Ltd, 551 US 308, 319 n3 (2007) (‘Every Court of Appeals that has considered the issue has held that a plaintiff may meet the scienter requirement by showing that the defendant acted intentionally or recklessly, though the Circuits differ on the degree of recklessness required’)). Under the PSLRA, in order to plead scienter adequately, a plaintiff must plead specific facts sufficient to convince a reasonable person that the inference of scienter is at least as compelling as any opposing inference (see question 14).

For section 11 claims, plaintiffs generally do not need to prove knowledge. Defendants who are non-issuers have several affirmative defences that function similar to scienter requirements (eg, non-issuer defendants are not liable if they acted with due diligence).

Section 12(a)(1) does not require plaintiffs to prove knowledge. Likewise, section 12(a)(2) does not require knowledge, although it does allow for a due-diligence defence. Due diligence requires a defendant to have exercised reasonable care in making the actionable statement.

For section 18 claims, plaintiffs do not need to prove knowledge.

Common law negligent misrepresentation claims generally require the plaintiff to prove that the defendant acted without reasonable care, and common law fraudulent misrepresentation claims generally require the plaintiff to prove scienter.


Is proof of reliance required, and are there any presumptions of reliance available to assist plaintiffs?

Reliance is required to make out a Rule 10b-5 claim. In order to show reliance, a plaintiff must demonstrate that he or she relied on the misrepresentation in the purchase or sale of the security.

The most direct way to show reliance is through direct reliance on an affirmative misrepresentation - for example, where a plaintiff hears a misrepresentation and acts on that misrepresentation by buying a stock.

Many plaintiffs, however, buy securities on national exchanges without directly confronting the misrepresentation. For this reason, the Supreme Court has sanctioned the use of the fraud-on-the-market presumption. In Basic, Inc v Levinson, 485 US 224 (1985), the plaintiffs claimed that they had sold their shares in Basic after the Basic board had claimed publicly that the company was not engaged in merger negotiations. It subsequently became known that Basic was in negotiations to, and did in fact, merge with another company. The plaintiffs claimed that the public denial of the merger talks artificially deflated Basic’s stock price. The Supreme Court noted that the modern securities market involves millions of shares changing hands between faceless investors. It reasoned that the means of proving reliance must reflect this market. That is, it would be impractical, if not impossible, for each plaintiff to show individual reliance. Therefore, the Court sanctioned the use of the fraud-on-the-market presumption, which postulates that buyers and sellers in a well-functioning exchange rely on the market price to transmit information honestly about the underlying security. Therefore, misstatements that enter into the market price can be said to be relied upon.

In Halliburton Co v Erica P John Fund, Inc, 573 U.S. 258 (2014), the Supreme Court revisited the Basic presumption of reliance and reaffirmed it in a 6-3 decision. The Court noted the academic controversy over the ‘efficient capital markets hypothesis’ but concluded that there was widespread agreement that public information affects stock prices. The Court also observed that, while some investors may not rely on the integrity of market prices, it is reasonable to presume that most investors do so.

Consequently, in order for the fraud-on-the-market presumption to apply:

  • the defendant’s misrepresentation must be public;
  • the misrepresentation must be material;
  • the security must be traded in an efficient market; and
  • the plaintiff must have purchased or sold shares between the time when the misrepresentation was made and when the truth was revealed.

If these facts are shown, the plaintiff can establish reliance by showing only that the misrepresentation impacted price.

The defendant can rebut the fraud-on-the-market presumption by severing the link between the alleged misrepresentation and either the market price or the plaintiff’s decision to trade. However, this is a high burden. On remand from the Supreme Court in Halliburton, the district court placed the burden to show lack of price impact on the defendant, and held that it would not decide on the class certification stage whether a disclosure was in fact a corrective disclosure (see Erica P John Fund, Inc v Halliburton Co, 309 FRD 251 (ND Tex 2015)). In April 2018, the district court approved a US$100 million settlement of the underlying securities class action.

In the wake of Halliburton, in considering applications to defeat class certification by rebutting the fraud-on-the-market presumption, courts are facing questions about how the burden of proof should be allocated, what evidence is required to rebut the presumption by showing lack of price impact, and how to consider expert testimony on these issues. Courts have already begun facing these questions (see, eg, Ark. Teachers Ret Sys v Goldman Sachs Grp, Inc, 879 F3d 474, 486 (2d Cir 2018); Waggoner v Barclays PLC, 875 F3d 79, 85, 99 (2d Cir 2017)).

There is a separate presumption of reliance, known as the Affiliated Ute presumption, where the claim is based on an alleged omission, and the defendant had a duty to disclose (see Affiliated Ute Citizens v United States, 406 US 128, 153-57 (1972)). Courts may look beyond the asserted pleadings to evaluate whether the case involves a failure to disclose or material misstatements (see In re Smith Barney Transfer Agent Litig, 290 FRD 42, 47-48 (SDNY 2013)). There is disagreement over whether this presumption applies to claims based on mixed misrepresentations and omissions. The defendant can rebut this presumption by showing that, regardless of the omission, the plaintiff would have made an identical investment decision.

Section 11 does not require plaintiffs to prove reliance. Nonetheless, a defendant can escape liability by showing that the plaintiff knew about the misstatement before making its investment decision.

Likewise, section 12 does not require plaintiffs to prove reliance.

Section 18 claims, by contrast, require actual reliance on the document filed with the SEC. That is, a plaintiff must show that he or she personally saw and relied on the misstatement (‘eyeball reliance’). Therefore, the fraud-on-the-market presumption is inapplicable to section 18. The requirement of eyeball reliance makes class actions under section 18 nearly impossible.

State law negligent and fraudulent misrepresentation claims generally require proof of reliance.


Is proof of causation required? How is causation established?

Proof of both transaction causation and loss causation is required for Rule 10b-5 claims. Whereas transaction causation largely mirrors traditional notions of reliance (that the investor relied on the market price in making a purchase or sale), loss causation requires a plaintiff to show a causal connection between the misrepresentation or omission and a plaintiff’s losses.

In Dura Pharmaceuticals Inc v Broudo, 544 US 336 (2005), the plaintiffs attempted to plead loss causation by alleging that Dura’s executives had made misstatements to the market about the likelihood that the Food and Drug Administration would approve an asthmatic spray device that the company was developing. In relying on these statements, the plaintiffs claimed to have paid an inflated price for Dura stock and, therefore, the plaintiffs claimed that they suffered damages. The Supreme Court found that the plaintiffs had not adequately alleged loss causation. Instead, the Court noted that purchasing at an inflated price does not cause any harm. Harm arises only when investors sell at a lower price than they paid. Consequently, the Supreme Court held that, to show loss causation, plaintiffs must demonstrate both their specific losses and the causal connection between those losses and the misstatement. This can be accomplished by showing, for example, that there was a decline in the stock price following corrective disclosure of the misstatement.

Usually, such a showing will require an expert witness. Typically, an expert will conduct an ‘event study’, which attempts to ascertain what portion of the decline in the stock price was caused by the disclosure of the alleged fraud. The purpose of such a study is to disentangle the effects on the stock price of other factors, such as market or industry-wide events. Courts have observed that event studies are now ‘almost obligatory’ in securities litigation (see In re Vivendi Universal, SA Sec Litig, 634 F Supp 2d 352 (SDNY 2009)).

Confusion regarding loss causation persists. Federal courts remain divided over whether (and if so how) loss causation may be established in cases without a corrective disclosure in the classic sense (ie, where the event or disclosure that triggered the stock price decline did not reveal the fraud on which the plaintiff’s claim is based). In Mineworkers’ Pension Scheme v First Solar, Inc, 881 F3d 750 (9th Cir 2018), the Ninth Circuit held that a plaintiff ‘need only show a causal connection between the fraud and the loss’ and may satisfy the loss causation requirement ‘even where the alleged fraud is not necessarily revealed prior to the economic loss’. Other federal courts have taken a stricter approach (see, eg, Tricontinental Indus Ltd v PricewaterhouseCoopers LLP, 475 F3d 824, 844 (7th Cir 2007) (plaintiffs must show they ‘experienced loss as a result of the exposure of [the defendant’s] misrepresentations’)).

In section 11 cases, plaintiffs need not show loss causation. However, defendants can reduce or eliminate recovery by showing that the misstatement did not cause any harm. This affirmative defence is called ‘negative causation’.

In section 12(a)(1) claims, loss causation is not required.

In section 12(a)(2) claims, plaintiffs need not show loss causation. Absence of loss causation is, however, an explicit statutory defence.

Common law fraudulent misrepresentation and negligent misrepresentation claims generally require the plaintiff to show loss causation (see Fin Guar Ins Co v Putnam Advisory Co, 783 F3d 395 (2d Cir 2015)).

Other elements of claim

What elements present special issues in the securities litigation context?

Two additional elements of a Rule 10b-5 claim should be highlighted: statutory standing and the scope of persons who may be liable.

To have standing to sue under Rule 10b-5, a plaintiff must have been a purchaser or seller of the security at issue. Therefore, fraud that causes a person not to engage in a securities transaction is not actionable (see Blue Chip Stamps v Manor Drug Stores, 421 US 723 (1975)).

This rule has taken on broader importance following the enactment of SLUSA. As noted in question 2, SLUSA pre-empts state law class actions that could have been brought in federal court. The Supreme Court has found that SLUSA applies even where state blue-sky laws would allow a ‘holder claim’ - that is, a claim that misinformation caused a person to hold a security and thereby suffer a loss. Therefore, the combined effect of SLUSA and the Blue Chip Stamps rule is that the federal law purchaser or seller requirement applies to all covered class actions.

With respect to the scope of liability, the Supreme Court has rejected secondary liability - liability for those who assist a primary violator - under Rule 10b-5 for private securities fraud actions (secondary liability for ‘controlling persons’ is discussed in question 16). In Central Bank of Denver NA v First Interstate Bank of Denver, 511 US 164 (1994), the plaintiff sued the Central Bank of Denver under Rule 10b-5 for statements made by the Colorado Springs-Stetson Hills Public Building Authority relating to certain bonds. The Central Bank of Denver was required to review the value of the property backing the bonds. The plaintiff alleged that, by not competently reviewing the value of the property, the Central Bank of Denver had aided and abetted the fraudulent statements. The Supreme Court held that Rule 10b-5 did not allow for aiding and abetting liability. Therefore, following Central Bank of Denver, courts have required a showing that the particular defendant made a fraudulent statement in order to find Rule 10b-5 liability (see Stoneridge Inv Partners, LLC v Scientific-Atlanta, 552 US 148, 158 (2008)).

The Supreme Court has subsequently defined narrowly who makes a statement for the purposes of Rule 10b-5. The Court held in Janus Capital Group, Inc v First Derivative Traders, 564 US 135 (2011), that a person makes a statement only if that person had ultimate authority over the statement, including its content and whether and how to communicate it. In Janus Capital, the Court held that an investment adviser could not be held liable under Rule 10b-5 for statements made in a mutual fund prospectus, as the fund, and not its adviser, made the statements. The SEC, however, retains statutory authority to bring suits against any person who ‘knowingly or recklessly provides substantial assistance’ to the speaker (see 15 USC section 78t(e)). As discussed in ‘Update and trends’, the scope of Janus is currently being litigated, including its application to scheme liability claims.

Finally, a practical note should be made about how the elements discussed above actually arise in securities cases. As noted in question 1, the vast majority of securities cases are dismissed or settle before trial. Often, therefore, the ultimate outcome of a securities claim will be decided on a pleading motion, as many defendants who do not succeed in obtaining an early dismissal will seek settlement. This places heavy emphasis on pleading standards, which are discussed further in question 14.

Limitation period

What is the relevant limitation period? When does it begin to run? Can it be extended or shortened?

For a claim brought under Rule 10b-5, the limitation period is two years (see 28 USC section 1658(b)(1)). For claims brought under sections 11 and 12, the limitation period is one year (see 15 USC section 77m). Following recent statutory amendments, it is unclear whether the limitation period for claims brought under section 18 is one or two years. See DeKalb Cnty Pension Fund v TransOcean Ltd, 817 F3d 393 (2d Cir 2016) (holding that 28 USC section 1658(b) supersedes 15 USC section 78r(c)). The limitation period begins to run upon the discovery of the violation, which includes both actual and constructive discovery of the violation. That is, courts determine when the limitation period begins to run by asking when the plaintiff discovered the fraud and when a reasonable investor would have discovered the fraud. The limitation period begins to run from whichever is earlier in time.

In order for the limitation period to begin, the plaintiff must have discovered sufficient facts to plead each element of a claim under the PSLRA, including scienter. In Merck & Co v Reynolds, 559 US 633 (2010), the plaintiffs brought a suit against Merck for misrepresenting the heart attack risks associated with its drug, Vioxx. The defendants moved to dismiss, claiming that the two-year limitation period had run. In support of this position, the defendants claimed that two events should have begun the limitation period. First, a study had shown that Vioxx caused more heart attacks than another drug, Naproxen. At the time, Merck explained the study by claiming that Naproxen may confer heart benefits. Second, the Food and Drug Administration sent Merck a warning letter alleging that its marketing of Vioxx was misleading, although the letter acknowledged that the Naproxen hypothesis could be true. The Court found that these events did not trigger the limitation period because they did not indicate scienter. The Court reasoned that, because scienter is an element of a Rule 10b-5 violation, the limitation period does not begin to run until the plaintiffs discover, or could discover, facts suggestive of scienter (see id at 648-49).

The two-year statute of limitations is extended for all members of a pending class action under the rule in American Pipe & Construction Co v Utah, 414 US 538 (1974), whether or not the class is eventually certified. This is referred to as ‘tolling’ the limitation period.

Rule 10b-5 claims also have a five-year ‘statue of repose’ (28 USC section 1658(b)(2)), which creates a substantive right for the defendant to be free from suit, and operates separately from the statute of limitations. The statute of repose does not depend on discovery of the violation. For claims brought under sections 11 and 12, the statute of repose is three years (see 15 USC section 77m). For the reasons given above, the repose period for claims brought under section 18 is unclear.

The Supreme Court has recently held that American Pipe tolling does not apply to the three-year statute of repose for sections 11 and 12. See Cal Pub Emps’ Ret Sys v ANZ Sec, Inc (CalPERS), 137 S Ct 2042 (2017). Following the same logic as CalPERS, courts have held that American Pipe tolling does not apply to the statute of repose for claims brought under section 10(b) of the 1934 Act either. See, for example, N Sound Capital LLC v Merck & Co, 702 F App’x 75 (3d Cir 2017); Dusek v JPMorgan Chase & Co, 832 F2d 1243 (11th Cir 2016); SRM Global Master Fund Ltd P’ship v Bear Stearns Cos, 829 F3d 173 (2d Cir 2016); Stein v Regions Morgan Keegan Select High Income Fund, Inc, 821 F3d 780 (6th Cir 2016). As discussed further below, the Court has more recently declined to extend American Pipe to allow subsequent filing of additional class actions after the statute of limitations expires.

Limitations periods for state law negligent and fraudulent misrepresentations claims vary by state.