Second Circuit Holds General Statements of Regulatory Compliance Cannot Sustain Securities Fraud Claim

It has been a not infrequent occurrence over the past years that, after a company announces bad news or corporate mismanagement, securities class actions have been filed challenging general statements made by the company about its compliance with regulatory requirements or its own ethics policies and procedures.

Earlier this week, in Singh v. Cigna Corp., the Second Circuit issued yet another strong decision rejecting that tactic. In the wake of Cigna, it is now clear in the Second Circuit that generalized statements that a company has established policies to comply with regulatory requirements, and that it expects every employee to act with integrity and to comply with regulatory requirements, cannot provide a basis for a securities fraud claim—even if it turns out that during the time the company is making such public statements, the company is not complying with regulatory requirements and its employees are not acting with integrity.

This article was republished by the Harvard Law School Forum on Corporate Governance and Financial Regulation.