Second Circuit Rejects Securities Claims Based On Generic Statements About Ethics And Compliance

The Court of Appeals for the Second Circuit yesterday affirmed the dismissal of a securities class action alleging misrepresentations arising from generalized statements about an issuer's compliance efforts and Code of Ethics. The decision in Singh v. Cigna Corporation held that such generic statements are not material because a reasonable investor could not have relied on them as representations of regulatory compliance.

The decision is welcome news for issuers in light of the many recent lawsuits alleging securities-law violations based on generalized statements about the importance of ethical standards and regulatory compliance. Such cases should be more difficult to maintain unless the issuer has touted its compliance efforts in detail.