Ninth Circuit Finds That Information Obtained Through FOIA Requests May Constitute Corrective Disclosure

On November 3, 2020, in the second decision addressing the standards for pleading loss causation under the Securities Exchange Act of 1934 in the last month, the Ninth Circuit reversed in part the dismissal of a securities fraud class action, holding that information obtained through a Freedom of Information Act (FOIA) request can be a “corrective disclosure” for purposes of pleading loss causation if the FOIA information revealed new information to the market. See Grigsby v. BofI Holding, Inc., No. 19-55042 (9th Cir. Nov. 3, 2020).

BofI is a nationwide bank that offers various financial services. In 2016, the SEC allegedly issued a pair of investigatory subpoenas to BofI related to possible money laundering. The next year, in response to a New York Post article reporting the investigation, BofI issued a press release denying any knowledge of an investigation into money laundering. Subsequently, the Post published information obtained through a FOIA request to the SEC allegedly showing that BofI knew about the investigation when it issued its press release denying such knowledge.

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