Half-Truths: Fraud By Omission Under The Federal Securities Laws

About two years ago, the Supreme Court held that Section 10(b) and Rule 10b-5(b) did not prohibit “pure omissions.” Rather, it prohibits making an “untrue statement of material fact  or [] omit[ting] to state a material fact necessary in order to make statements made . . . not misleading.”  Macquarie Infrastructure Corp. v. Moab Partners, L.P, 144 S. Ct. 885, 888 (2024) (quoting Rule 10b-5(b) (emphasis added)). The Supreme Court accurately described the second portion of Rule 10b-5(b)—the portion italicized—as prohibiting “half-truths.”  Id. at 890.  The Court described half-truths as “representations that state the truth only so far as it goes, while omitting critical qualifying information.”  Id. at 891.

The Court, however, did not address an issue that came up during argument that could further clarify what constitutes an actionable half-truth.  Specifically, counsel for the petitioner (the defendant before the district court) suggested that a statement can only be misleading for failure to disclose a fact that is “like in kind in both subject matter and specificity.”  Macquarie Infrastructure Corp. v. Moab Partners LP, Case No. 22-1165 (U.S.), Transcript at 9:2-6; 10:2-6.  In contrast, counsel for the respondent (the plaintiff before the district court) took the position that a statement could be misleading for failure to disclose a fact on the “same subject” and that subject should be defined broadly.  Id. at 27:10-17, 34:6-16.

Numerous courts have obviously addressed the question as to what constitutes a half-truth both before and after Macquarie, but to the best of my knowledge, no court had actually ruled on the question as specifically framed by counsel during the Macquarie oral argument until last month.  Thus, in Newtyn Partners, LP v. Alliance Data Systems Corp., __ F.4^th ___, 2026 WL 161422 (6^th Cir. Jan. 21, 2026), the United States Court of Appeals for the Sixth Circuit affirmed a district court’s order granting a motion to dismiss a claim under Section 10(b) and Rule 10b-5. In its decision, the Sixth Circuit held that:

When it comes to alleged half-truths, a statement cannot be misleading when the words spoken and the facts omitted operate on different “levels of generality.” Put simply, the omitted facts must have a reasonably close fit to what defendants disclosed.

Alliance Data, 2026 WL 161422, at *7 “(internal citation omitted). I believe that the Sixth Circuit decision is correct and should provide further guidance to courts throughout the country. Courts obviously will still exercise judgment as to what constitutes a “reasonably close fit” between a statement and an allegedly omitted fact, but the Sixth Circuit decision will hopefully help bring an end to arguments that try to define the subject matter of a statement too broadly in order to claim that an omission rendered the statement misleading.