Roger Cooper, Jared Gerber, and Elizabeth Vicens are partners at Cleary Gottlieb Steen & Hamilton LLP. This post is based on a Cleary Gottlieb memorandum by Mr. Cooper, Mr. Gerber, Ms. Vincens, Breon Peace, Matthew Slater, and Alexis Collins.
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. [On March 5, 2019], 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.
Background
The general facts alleged in Cigna will be familiar to the readers of many recent securities fraud complaints, although they are particular in their detail. During the relevant time period, Cigna, a multi-national health services organization, filed annual reports with the SEC on Form 10-K in which Cigna stated, among other things, that it had “established policies and procedures to comply with applicable requirements” and that it “expect[ed] to continue to allocate significant resources to various compliance efforts.”
