Implications of Section 11 Claims on Directors and Officers Insurance
Newly public companies can miss earnings estimates or announce bad news shortly after going public. If the resulting stock drop is significant, a shareholder class action alleging violation of Section 11 of the Securities Act of 1933 for misstatements in a registration statement may be filed. Section 11 claims are currently being tested in the United States Supreme Court in Cyan, Inc., et al. v. Beaver County Employees Retirement Fund, et al. Understanding the risks — and how Section 11 claims will be litigated in state and federal courts — can help organizations ensure that they are adequately protected.