April 18, 2023

Direct Listings: SEC Sits Out Slack Technologies SCOTUS Appeal

The SCOTUS heard oral arguments yesterday in the Slack Technologies case, which focuses on whether Section 11 of the Securities Act applies to direct listings.  If you haven’t been following the proceedings closely, check out this recent post on SCOTUSblog, which will get you up to speed pretty quickly. SCOTUSblog notes that the SEC is sitting this one out and hasn’t filed a brief in the case. This excerpt explains why the SEC may have opted to do that, and also discusses another interesting point raised in an amicus brief:

Perhaps the most interesting aspect of the briefing is the “dog that does not bark.” Remarkably, the SEC does not appear in this case, though it participated directly in the process of approving the direct listing process, and so the solicitor general will not appear at oral argument. The justices well might suppose that the clarity of the text made it impossible for the SEC to file a brief in support of Pirani. It also might matter that the SEC filed a forceful brief in Barnes, recommending the result that Friendly reached. A brief calling for the opposite result now would be an eye-opener.

One other detail of the briefing warrants attention. Slack takes the position that Pirani cannot possibly prove that the shares he purchased were registered. An amicus brief from a group of law and business professors forcefully argues that under the practices and technology of the modern securities industry, Pirani well might be able to identify the seller of his shares, and thus successfully make out a claim under Sections 11 and 12 even under Slack’s reading of the statute. Those professors do not support Pirani’s reading of Sections 11 and 12, but they do urge the court not to overstate the difficulty of Pirani successfully proving the source of his shares.

The blog’s reference to the SEC’s position in “Barnes” refers to Barnes v. Osofsky, the 2nd Cir.’s landmark 1967 decision that held that only purchasers of shares covered by the registration statement had standing to make claims under Section 11 and Section 12 of the Securities Act.  The amicus brief referred to in this excerpt is one of many filed in the case, all of which are available here.

John Jenkins