recognized that disclosure of negative inside information by insider fiduciaries could harm the plan and plan participants by immediately reducing the value of the fund this court thus required the plaintiffs to specific alternative course of conduct that could not do more harm than good to the fund as a whole here respondents allege that insider fiduciary should have taken inside corporate information disclosed through the regular corporate disclosure channels because disclosure was inevitable and the harms from concealment only grow over time there are two basic problems with that submission st respondents allegations face a insurmountable  do not have a fiduciary obligation to use information gained in a corporate capacity or to use the regular corporate channels of disclosure for the benefit of planned participants it's particularly true with respect to the use of regular corporate disclosure channels the use of those channels is something that is inherently done wearing a corporate hat and indeed the insiders only have access to the regular corporate disclosure channels because of their corporate roles it requires no extension of whatsoever to say that the use of those corporate disclosure channels is a corporate act and that corporate act is already pervasively regulated by the securities law but nd even if there were a fiduciary obligation to use insider information gained in a corporate capacity or to use corporate disclosure channels the allegations here would still be insufficient the allegations that no fraud lasts wherever disclosures in evitable and the harms of concealment only grow over time so you it is prudent to disclose early could be made in every case those generic allegations by definition could not separate goats from sheep they could be made every single time the premise was condit's allegation is also fundamentally inconsistent with the premise of the rd consideration and didn't offer the rd consideration due to half didn't offer is premised on the objective reality that if you disclose negative inside information to the market it's going to have a negative impact on the value of the stock which is all and aesop holds and so this court said we need something very specific very different from the normal course that would allow the fiduciary to say no disclosing this and committing this immediate harm is nonetheless prudent so in your nd argument is it your point that there are always going to be different classes of beneficiaries some of whom would be harmed some of whom would be helped by earlier disclosure and therefore the duty of prudence cannot be violated in those circumstances i think that's absolutely part of it i mean i think there are multiple of what more because that seems to come out of your the  argument as close to a bright line you have the exception for the new we the new plan but it seems close to a bright line i'm wondering if there is any wiggle room there was pretty much a bright line i think it ends up being pretty close to a bright line which is the i mean the reason you can have an exception for the situation where it's a newly created aesop is because in that situation you don't have to trade off the interest of net buyers in that sellers short term holders long term can you imagine a circumstance where you have different classes of beneficiaries whether it still be a claim that could be made that earlier disclosure should have been made in a stock price drop because i have a truck i have trouble coming up with one of those no i don't think that means you can't have duty of prudence claims in this context i mean the classic duty of prudence claim which has the virtue of not trading off different beneficiaries interests would be a duty of prudence claim that says that when the company set up this aesop that instead it up in the right way or when they're buying or selling they're paying above market commissions those kind of brute duty of prudence claims could be rigged pled and they don't create this kind of trade off of the interests of one group versus another so i definitely think that's an important feature of this but i also think it's worth recognizing that the premise of the respondents claim is really directly contrary to the premise of the rd didn't offer consideration because the premise of their claim is that no fraud last forever not this fraud in particular but no fraud lasts forever the cost of concealment is increased over time they said in one thousand nine hundred and ninety law review in a two thousand and eight financial journal in their nd amendment complaint to buttress that claim and so early disclosure is always going to be the prudent not necessarily there's a there's a time for investigation proper investigation there is time for corrective measures that could reduce the loss the economic principle however is both logical and supported by the literature so i am not sure what you think is missing from the specifics other than your answer that the economic principle shouldn't exist at all that that that's seems to put that isn't that a matter of fact forward that you're the trier of fact it will be a battle of competing experts but certainly shouldn't they be entitle on a motion to dismiss to rely on what is well founded economic theory well i hope not which is well say why not because i think in a situation like this a fiduciary that's facing these competing obligations among different members of the plan and it's also confronted with well you can't really be saying that it's a fiduciary duty to help sellers promote fraudulent conduct by avoiding losses for people that seems contrary to what we would the effects of the fraud they're going to benefit from it not very logical is it so it seems to me you have to look at what holders are experiencing and what potential buyers are experiencing and by that measure both of them will be harmed by the way so it's just a sort of money or i think there's two points there there's what you expect the fiduciary to be doing and then what you expect the corporation in the corporate officers to be doing with respect to the fiduciary when it comes to an  really expect them to be doing is not much because if they do anything with inside information to try to benefit the plan participants and not the market as a whole there they were right there in their corporate hat as a nice they're charged with exercising due diligence and care for as a fiduciary wherever they secure that knowledge there is no case that says where you secure that knowledge defines your that there is no obligation to use the inside information gained in a corporate capacity in a fiduciary capacity i admit that i think that would be a wise extension of peace and i think it would reflect the reality that in practice on a day to day basis aesop that is being managed by insiders is using inside information in an active way to trade all of these programs are essentially set up to prevent that from happening in order to comply with the securities law but it doesn't that's different from disclosure you're right it's much different from what you're obligated to do the securities laws are not the self that contrary to the government's position the securities laws don't purport to govern you that you shared exactly and so when you have a case like this where respondents have alleged that the specific course of conduct that's going to not do more harm than good is to disclose through the regular securities channels that is a clear sign to you that that is a problem because the regular securities channels of i b m the disclosures that are made through those channels are made by i b m officials wearing their corporate hats to disclose on behalf of the corporation and if you look at the complaint here there's nothing about this complaint that's specific to these fiduciaries did something is a fiduciary that you expect a fiduciary normally to do that was wrong this is a securities law complaint and it's perfectly fine to have it broad is a securities law complaint when the basic belief is that insiders at the corporation used corporate disclosure all channels to not give enough information to the market as a whole but that's what this case is a securities case and i would respectfully submit it should be pled and or the securities law it should be subject to the limits of the p s l r a it should be subject to the limit that this court has put on securities actions over the year in cases like blue chip stamps and central bank of denver you know we don't have holder claims into the securities law we don't have aiding and abetting claims into the securities law but you can have all of that as an a risk security action where you don't even have a c enter requirement and i think if you think about the way that this case was treated as a security case it's very you know the underlying securities allegations is that i b m miscalculated and misapplied the gap regulations and didn't make an early disclosure of the losses of my correct electronics unit now in order to figure out whether that's a securities violation you have to figure out whether the microelectronics unit is sufficiently separate from the broader reporting unit that it's part of now the district court when it heard this case it's curi that i'll give you just over the line on that allegation seems kind of complicated but it's just over the line but then into the securities law i get to see enter and i have to see a strong inference of the enter and i don't see anything close to a strong inference to see enter sherry's for aesop's but i guess i'm less clear why this court should be in the business of accommodating that decision it's a choice it's not in that ability that insiders would serve as trustees and i guess i'm not clear exactly what employees gain from having insiders as trustees if at the end of the day they wind up being no nothings because they can't do anything as you've kind of indicated they just can't do anything an outsider might in these circumstances be able to make a reasoned judgment of some kind about whether to sell by or act differently in a way that an insider is as you point out disabled from doing so can you help me with that i'll try to just of course it's a st i don't think it's right to say that the outsider is going to be in a better position to do something with this information because the outsiders by definition isn't going to get the inside information that you're only getting because our corporate insider you know these things you know news possible maybe maybe maybe maybe not but at least there's a metaphysical possibility they can do something other than be a know nothing and so can you help me understand why we would want to encourage insider  trustees and provide special rules for them what's gain by employees i don't see any real account in the brief so i'll be honest as to what what congress is getting at why it's a good idea why we should why we should underwrite so you know i don't to quibble too much on the premise i mean if it leaks it's public information on a different box but i want to be responsive and here's what i would say what employees gain is two things one is they do gain some cost savings because it costs but here's here's the real thing you gain which is you incentivize companies to have the pension plans in the st place and you incentivize them to have pension plans they got to take a step back and see what the court did in peace and which is you know this is an unusual and we're going to deliberately deviate from the common law rule we're going to set this up it'll be easier to do it now with companies like i b m have done and i think it's important understand this is they have not said oh well you know for everything else we offer two hundred and one funds in our plan and for everything else we're going to use vanguard aesop we're going to use just our inside guys that's not how they do it they set up all two hundred plans they have very senior corporate officials run that they think they're doing their employees a favor not only by saving the cost but by having very sophisticated individuals run these the easiest thing for i b m to do is to say let's get rid of the e c so we're not going to we're not and that's clearly contradicts congress intent but they're not going to change the way they run two hundred dollars funds in order to accommodate the aesop they'll just get rid of the so that i have the roadmap clear if we were to agree with you on your nd argument which one we discussed earlier we don't get into the p graham issue or that some of the issues raised by just score such and some of just to sort of my worst questions right i think that's right and then i may be back here in another three years and i think the advantage of the peak room issue i mean and part of the reason we thought we should present it for the court's benefit is that that really i think would be a more complete solution to this because i think we've had you have a i read the question whether the more harm than good pleading consideration th rd bank roll can be satisfied by generalized allegations that the arm of an inevitable discovery of an alleged fraud generally cleese's over time now i what do you imagine or do you imagine that there's any particular disclosure that could meet that standard later what's missing what they say what's missing is any kind of detail about the nature of this plan the precise circumstances they've either just set up the plan or it was a you know a new growth company so they would have known that ninety eight percent of the people were were net buyers i mean maybe you could imagine that but honestly this is where i was getting with this is i think you know the courts have had five years of experience or whatever it is with the duden hoffer considerations and i think as the cases of mature what you've seen is that the claims of the prudent alternative course have migrated they started with things that actually were fiduciary actions they were actions like let's stop trading i mean that would be a fiduciary action or let's make an extraordinary disclosure not within the normal security channels make an extraordinary disclosure but when courts were confronted with those courses what they concluded is a prudent fiduciary could say that's crazy and so those claims didn't get off the ground so as these claims of matured the plaintiff said we know the right way to do this is a very subtle disclosure through the regular corporate channels and that will solve the problem because it won't spook the market but the problem is really twofold once you do that st of all you said that they really have to put on the corporate hat and they have to make the disclosure through the regular corporate channels and part of the reason it's less spooky for the market is because we're used to corporate officials making disclosures through regular corporate channels we're not used to fiduciary coming in and blowing the top off of the whole thing in some extraordinary way and so they really do plead themselves into a peak of a problem but the nd thing and i think this is very important is as the cases mature my friend on the other side points out quite correctly that you can't make any disclosure just to the plan participants so you have these special responsibilities as a fiduciary to the plan participants but you can't make a special disclosure to them you have to disclose to the entire market but once these cases of mature to the point where even the plaintiffs are saying which you need to do if you need to make a disclosure to the entire market and you need to do it through the regular corporate disclosure channels boy we have a body of law that is precisely attuned to regulating the adequacy of disclosure by corporate officials through corporate channels i market as a whole your argument now and the government and most of the briefs here seem as just a sort of my error pointed out to be addressing a different issue than and the seemed to be dealing with what i called the nd part of the three considerations and that is how the relation between securities laws and arista law ought to be when at the last sentence there was absolutely deliberate namely we didn't have the views of the government all right so now we have the views of the government on that question but in reading them i realize one i don't know what the lower thought courts think about those views i don't know what the securities community and all the others think about those views therefore why don't we just stick to the allegations in those paragraphs that when i read them seem fairly specific rather we know what they are and you know what they are so one why don't we simply address that leaving the other questions you raised to be developed in lower courts and then having addressed that we look at what they say here in the complaint and at the moment i'm thinking it seems out of what what's wrong with it so just as prior i think that we're happy to win this case under the rd factor or the nd factor obviously if you tell me you're going to vote against us on the rd factor i'd really like you to look at nd factor but in all events i don't think we should lose under the rd factor because if you look at the allegations here most of them could be made in every single not this was during the last period the plan was and that buyer of stalk they've walked away from that because it turns out although the alleged it was wrong and the requests for the answer no no  no willing to lead to such and such is wrong now we'll have some discussion about the with all due respect what happened here is they made that allegation based on publicly available documents it was pointed out to the district court and the district court in dismissing this case said that's wrong it's a net seller i'm not going to decide this case on have been a mistake in fact and so he said it so it's publicly available to me it is i'm going to take judicial notice of it they were a net seller by a couple one hundred million dollars which of course is exactly what you'd they would be a net seller would that then be sufficient i don't think so because i think particularly the fiduciary of a long established plan could say i don't know it for a fact but i think we're very likely to be a net seller if i could avert you to another one of their specific allegations you want to give a reference yeah it's not page twenty nine dollars this is their so called inevitability allegations which are case specific but of course they say that the sale is more likely than not and that if there were a sale it would be likely that the that the results would be disclosed so more likely than not and likely does not equal inevitability so if you want to look at the very specific allegations here i don't think it gets it done thank you thank you counsel mr chief justice and may please the court and didn't cover this court recognize that an aesop to siri would sometimes have been arrested based obligation to take action based on inside information the court however didn't define the precise circumstances but identified certain relevant considerations for future cases here we consider just one possible response to inside information namely to disclose it to the entire market but there is a well the body of federal law about when such disclosures are necessary and appropriate for the protection of investors and the views of the f c c and the department of labor was prudent may be required to take a number of actions based on inside information a recession rarely if ever require a fiduciary to effect an unplanned market wide disclosure that the federal securities laws do not require one of that for the sherry i think for two reasons your honor let's look at that that leads quite next to what i was going to say we think it would undermine the objectives of the securities laws to impose an additional didn't see that in the district or on the court of appeal so we are we going the court came for the case came to our office we looked at this case of pressure we decide what can we add what can we how can we use a lot of the court we think we can  use for the court but discussing the object of the securities laws but i importantly as i just noted i think all our all of our analysis is just as relevant to the rd prong to the more harm the good standard as well because i think prudent for do sherry and this position faces the confines of the securities laws where they can't do what it is that everybody would agree is the best thing for the participants right they should trade on the inside information or they should disclose it selectively to those participants they can't do that t illegal and so the question is should i make a public disclosure and when you get we're talking about doing that i think it's prudent and i think at least so a reasonable producer could conclude it's prudent to not act so look to the balance that congress has struck and that the commission has struck into deciding when such disclosure of necessary appropriate for the protection of all investors including the very investors that are participating in this isa suisse understood the securities it only controls disclosure to the extent that something you say is misleading this fraudulent you have to have a statement that is misleading or fraudulent let's assume it's a new company and you don't have to make a statement but you know this is alleged here that a fraud is going on that it's going to be inevitably caught and it's going to be conte before you have to make a disclosure you're suggesting that in that situation there is no duty to the to and so to do sherry to make a disclosure that is not required by the f entirely addition additional disclosure regime where certain events that are major events like material impairments are like changes in control or definite agreements have to be disclosed within four days but now that's not what you said before and then there's ten q and there's ten k i would also point out that this very case is in fact based on allegations that the company had made a misstatement before and needed to correct that misstatement so this is a tale of fraud case  evaluated whether the allegations are sufficient to state that do you think that is workable practical to require an insider fi to determine whether the disclosure of inference and the size information to the public at a particular point in time will do more harm than good does is that inherently a workable standard  or is it your argument that it is not and that's why you reach the position that you reach it seems to me in that situation that the fiduciary has to make a very complicated calculation but maybe maybe it's more doable than it seems me whether the are the participants in that are they net buyers or sellers what will the situation be at some point in the future when the information will inevitably come out so i think it is workable in the sense that if you put in produce very in that position would not be ignorant but nice close its eyes to the entire body of law that's intended to balance those interests i agree that it's not a workable solution to have an ad hoc balancing and i don't think it would be  would look to that body of law and they would reasonably conclude at least they could reasonably close which i take to be everyone agrees is the standard here that making a disclosure that the company has inside is not in the best interest of shareholders and the federal securities laws the expert and the expert commission a site is not necessary and appropriate for that does sound or where we are it seemed to me is you trying to argue both but are there things in the the reason that i stress that is because my reaction to what you say is i don't know and i would like a lot of argument in a lot of court so i assume that in this case the does that he should have he should have a prudent trustee would have disclosed the information to the market through the channels that they are s question is there a special reason why he shouldn't disclose it anyway because disclosing it will hurt the plant and its participants answer  no there's nothing special here as a general matter disclose it sooner rather than later if as the court of appeals said disclosure is inevitable so they allege it was inevitable they allege that loads of information that shows if you didn't have a double do it fast that will not hurt the plan it will help it and there we are criterion three is satisfied so i've sketched out the put their position better than i did but but but still if that's roughly their position why don't if we narrow question two what we gritted on why don't they w i think because a prudent for do sherry can't narrow it it's artificial to say that a prudent to do sherry would should would or could or should ignore the body of law that speaks to this precise question that speaks to precisely be unhelpful and artificial to could to assume in this case that a prudent for do sherri would just ignore that body of law and i'd point out that it's not always true that you would disclose in for disclosing information if that will come out sooner would be better  maybe in the case of negative information but positive information would come would go through the same mr please i mean it does sound like you want us to scrap two than half learned and start all over again so i don't think that i don't that's right i think our position is fully consistent with didn't offer and all three factors are still relevant it's just that in this precise circumstance the st two factors do all the do all of the work so take for example a case where the where the client complaint was you should take the alternative action you should take was to trade on this information or or was to selectively disclose it to the participants i think we'd say no and he didn't offer says no because that's illegal and prudent producers don't take illegal acts that isn't mean that than good i mean that is what i think justice alito called a balancing test and that's what didn't have her said we should do now there are reasons against balancing tests but that's what it says sure but before you get to that back to the courts and you should also consider whether a receipt based obligation to disclose in that scenario would be inconsistent with the objectives of the scariest laws we think in almost every case it would be and so you don't have to get to that rd factor but even if you do we think a reasonable prudent to do sherri could conclude that making  disclosure that's not required by the scariest laws the commission that balances what how much is closer is too much and the timing for those disclosures would do more harm than good to the to the investors in the he said thank you counsel assets and this is meaningful as a pleading matter and also as a substantive matter we forget sometimes didn't offer was about a circuit split where the presumption of prudence in favor of aesop to do sherry's was either to be applied at the pleading stage or at the evidentiary stage and this court found that notwithstanding all the policy concerns about the need to encourage aesop's and all the difficulties caused by the intersection of the of the arista and the securit laws it was still not appropriate to have that presumption in place it's not in the statute the statute says the duty of prudence here is basically the same as would apply to anonymous investment and in fact a lot of the issues we're discussing today about it minister a bit minister ability and how difficult it might be to apply this test come up in the non aesop context all the time when you have an investment that is alleged to be imprudent a mutual fund that's alleged to be imprudent you will have people in the plan who are different stakeholders differently situated some of them are long term investors some of them are short term investors and whether the plan in that case is in deciding not whether or not to disclose but they're deciding whether or not to sell the investment or take it off the menu they have to balance those interests of those different shareholders all the time and they have to make a lot of very difficult decisions and they do in fact if they're doing their job right a lot of very difficult analysis in monitoring those investments and the way courts have been dealing with those kinds of cases for decades is on a case by case context specific basis a sen asking the same kind question that the court asked here and didn't offer is the decision that you're examining would it have done more harm than good to the people whose interests you're supposed to be protecting that particular if you take causes more harm than good to sell reveal quickly and they say that couldn't be enough all you did was take the sentence from didn't offer and just write it in slightly different words and they're saying that wasn't good enough to satisfy you should have been more specific you should have listed a few of those shareholder interest you should have which you tried to do and that was wrong ok so what about that well actually one of six is not the only place where we talk about those interests this case here is actually not does not turn on that general allegation that economic principle about disclose sooner rather than later because it is not always going to be the case if you are looking at it from the perspective of an better to disclose sooner than later but here it was because here you have a year of trying to sell the company and hiring goldman sachs to do it a year of that before we even say the class period begins we didn't say they should be sued as of two thousand and thirteen when they start looking we say a year later when they've been trying to do this for the year when they've invested considerable resources in it it's more likely than not inevitably going to be disclosed that isn't the problem is the th and th circuit said in similar circumstances that you have different classes of beneficiaries some of whom would be harmed some of whom would be benefited and when that's the circumstance it's a little hard to hold the fiduciary liable for violating the duty of prudence given the different interests of the different classes of beneficiaries what's wrong with that that conclusion or a couple of things that i would take issue with i'm not necessarily with the th and six circuits rulings but they came to those conclusions based on different underlying facts you can't to know in real time if you're going to have more buyers than sellers you can't know this kind information until after the fact and a recess has always looked at even going back to recess we've always looked at what they knew at the time but what you can know and what you can think about and put at the fore is the long term interest of the investment because the long term interest of the investment interrupt you there i'm sorry  but how how is it that a risk if you do share wouldn't know at the time whether the fund is a net buyer or seller i would thought that information would have been available you're positing that it's not available and i guess i'm just a little confused  interrupting but that that's just not obvious to me well it depends on the way the plan is operated and frankly and i'm speaking from experience here having litigated on both sides of many arista cases you generally are not going to know that information about what the fiduciary is new until you get to discovery oh i understand did that the plaintiff might not know at the time he's pleading his case but he received to do sheri would know i would think whether the fund is a net buyer and that uncertainty about how the different classes of inefficiencies would be affected if you really don't know the precise circumstance might miss and something they're well even if you know that it's been a net buyer for the past year you don't know and i think even the th circuit pointed this out in more tone where was alleged to be a net buyer you don't know that that's going to continue for the forseeable future and you're not required as a fiduciary to predict the future about that but what do you think a reasonable  is supposed to do if the fiduciary doesn't know well the one thing you do know for sure is that if you make a disclosure the stock price will drop we concede that and that harm both the drop and the timeline of the recovery that's going to affect the holders and for the vast majority of the risk of plans including this one most people are neither buyers nor sellers most people are holders most people especially when it comes to the buy and sell on a regular basis they sit and they don't pay attention to it at all and if you're going to have a stock harsher stock price correction and a slower stock price recovery that will affect all the holders that will affect the long term stability of the investment was your view that in pretty much every case maybe there are some exceptions but that in pretty much every case the role of the fiduciary is to operate consistently with the holders neither the  the sellers but just the holders well when you're thinking about the long term what's best long term for the investment you're going to think about the holders more than the buyers and sellers there could be specific factual circumstances where you have an unusual company in an unusual situation where in fact most people are buyers or most of them are sellers but in the vast majority of cases yes you should put the holders up and you said a number of times the long term value of the investment why is that the thing that  y should look to well for one thing it's the thing you can actually make a reasonable assessment about in real time at the time based on what you as a fiduciary know it doesn't require you to figure out whether you've been a buyer or seller over the past however many years or months and then try to make a prediction about whether you will continue to be a buyer seller it's something you can think about in a way very much the way you would think about other non stop investments because that that same issue comes up with investment all the time if that is the case and and recent posts to the if you sure are supposed to consider the long term best interests of some abstract identified person why wouldn't the securities law be a really good place to start and maybe finish in assessing what those long term overall health of corporate interests might be i would respond to that in two ways one subject to reasonable cost imposing reasonable costs and reasonable duty so i don't disagree with that description of the securities laws but the securities laws have different interests than rissa does and that's going to create a problem when you're i think as a practical matter much of the time it is not all of the time and what we are here to discuss and what the question presented to this court is about is what kind of a pleading standard should be adopted well where did th two diver edge well i couldn't envision at least two situations where they might diverged and the reason they do is because the two statutes have different concerns and they protect different interests so the securities laws care about motive securities laws and risk are meant to prevent you just pointing you know he would say you're using the arista clause to water down the security standard no it will actually play out as a real difference because let's say you adopt the government's rule we'll be back here in five years trying to figure out what that means it seems like a nice bright line clear rule it's not and if you think about it a little bit and push forward you can see why because when you're putting a claim under the securities laws you have to meet the pleading standard of the p s l already we all agree on that and when you're pleading a claim under a risk you don't we all agree on that you don't  let's say we've adopted the government's rule now do i have to plead as in a risk participant see enter under the p s l r n a in order to plead more harm than good under a recess and if i don't what do i have to plead because is there a securities law violation if there is not an actionable ten b five action underneath it or is the standard maybe what the f c c could do if it brought it in for some action because the f c c is not obliged to meet the p s l standards how does that go  to work we're going to be sending that back to the courts and they're going to be trying to figure out how do i apply the securities wall which cares about things like motive to in a risk action which doesn't and figure out if does in this context because if we're concerned about the net interest of the fund and they are completely aligned with the net interest of the companies you've suggested them and that is the standard that best protects them that we've developed over time and through the securit well actually now i think in answering your question just discourse that i can get back to that last nd part of me answer justice kagan which is that if you force people to plead what a private litigant could plead under the securities laws but under rissa you are as a matter of statute a plain language of the risk of statute imposing a pleading requirement on a risk a claim that is not in the statute you're doing exactly what this court said it couldn't do in didn't offer but wouldn't and the government's rule really doesn't adequately address that either i think of it as the rinehart example the nd circuit case of reinhart so you have a lehman brothers which is massive sub prime exposure and you bring a securities claim against them and say they should have disclosed it once they knew the risks and so forth it's pretty straightforward tenby five claim and the securities laws say if they knew about it and they had the requisite see enter they should have disclosed but if you're looking at it from the point of view of a risk fiduciary would think would do more harm than good at the time you could make an argument a plausible argument that a prudent fiduciary would say well it's a particularly fraught time in the market for companies like us people to bear stearn has gone under people are wondering if we're next i actually think from a recent point of view we ought to wait and that's part of the reason we do a separate inquiry for a recycling as opposed to assuming there just  defender sherry who is simply managing a fund is not necessarily doing things on a very regular basis that affect the market price of of stocks but an insider  fiduciary here would be would net and insider fiduciary would receive daily or very regularly all sorts of information that has if disks that might if disclosed have an effect on the price of the stock so it wouldn't is this going to result in the constant injection into the mix of information about stocks all kinds of information that wouldn't otherwise come out i something comes out in one thousand nine hundred and five and then over the course of the next one thousand years it's adopted by various circuits although not all of them all that time there are people bringing claims against insider fiduciary use for failing to make the kind of disclosures we're talking about yet as far as i can see there was no difference in the number of insiders who became who continued to be a point to this fiduciary s and there was no diminution in the number of aesop's that companies decided to have in fact the reason there was an viable prudence arista claim against the enron to do sherry's is that they were also insiders who knew that the company was a house of cards and so they should have acted on that information to protect plan participants under petitioners rule the enron fiduciary have no obligation to act on their information about a company like enron it doesn't make sense and there's no basis for it a question i think it was just as prior research earlier as to why it's useful to have insiders as to do sherry's it's actually because of the inside information and are therefore in a better position to act to protect planned participants that makes them that's an advantage that's a feature not a in the case where you have here where you have and i can i sense that we all have a little bit of a concern about a situation where the securities case is dismissed for failing to plead c enters as happened here but the arista case is allowed to go forward and it seems like reopening the door to repleat ing securities cases as a risk cases is this going to happen all the time it shouldn't this should be the rare exception that even the government in it brief talks about you know extraordinary circumstances when you might need to make a disclosure even though the securities laws don't requirement require it i don't think they have this case in mind but this is actually a rare case where you have a situation where you have to do sherry's who happened to be insiders insiders who happened to be involved in the thing that we as alleged to have inflated the stock price who happen have direct knowledge of that and happen to have responsibility for the accounting of that and therefore are in a position to know about it you know there is a th member of the retirement plans committee we didn't sue the senior vice president of human resources we didn't sue him because they wouldn't have any knowledge of microelectronics the effort to sell it or how to account for that we what we have the general counsel the chief accounting officer and the c f o and they spend a year trying to sell this it becomes more likely than not it's going to be sold and if it's sold the disclosure is going to come out and you're not in a situation where i b m is a particularly sensitive juncture such that they can't make the disclosure without throwing things into disarray so yes i'm not sure why it's so rare  things you just didn't find fiduciary who's an insider that's what this about and then knows something whether they're involved or not as long as they know the duties triggered so that's something that's going to affect the stock price that doesn't seem rare at all that seems fairly commonplace men wrong about that i think so i know i speak not just in theory but from my own experience with these cases both before and after munch or and before and after didn't offer i should say these cases even with the standard as applied by the nd circuit here are hard to plead and they're hard to win they don't get through very often less often than securities cases do it's much more common for the securities case to get through than for the arista case to get through and that's even before didn't offer that was the case if you want to i don't want to sort of poor cold water on this issue but it sounds to me listening disclose in a different you know that's the issue that's the nd so if i thought that that's the nd question the nd part not the rd and if i thought we just granted the  what should i do in terms of the disposition of this case you know the words i think the issue you raised both raise and discuss is very interesting and important but i don't know that it's here so if i think that what's the right disposition disclosure here would not have been inconsistent with the securities laws just because it's not required by them even the government concedes it's not last year  is it isn't ok suppose i'm uncertain and don't think the issue was presented sufficiently below and or argued sufficiently here what do i do i mean for your i did not ask you it's not hostile or friendly i just want to know what you think i and it's a tricky proposition because you have to send i think you would have to send it back to the nd circuit but you'll have to tell them what kind of pleading needs to be done to answer this question what statute are we pleading under what interest matter because if you are just analyzing this as an illicit claim but you are saying you can only make disclosures that are required by the securities laws it becomes a very difficult cert to resolve that circuit split basically is earlier disclosure required in a situation when there are different classes of beneficiaries wars that a situation where a prudent to do sherry should not be held liable is not the question presented well i think that it's a yes or no answer to that question that it has been asked yes and in that question presented i think the nd circuit did exactly what you would want courts to be doing in analyzing these issues you know just because you can plead that a fiduciary knows something that hasn't been disclosed and you can try to say that it's inevitable doesn't mean that all the facts around it are going to back that up and it doesn't mean the district court is going to look at that and be persuaded just because you said it's inevitable and earlier is better than later you have to have the meat on the bones or it doesn't work so wouldn't looking at mr command and the thing just at the rd prong you suggest that whether you're a buyer or seller can't be judged that you really should be looking at the hold hold class but none of that is pled you played you were a buyer and the district court said that the period showed more behind than selling in the district court said no it shows more selling them behind so wouldn't a more particularized pleading basically think in our complaint we pleaded that holders were also damaged here by the harsher correction and slower stock price recovery that result you said that but we still don't know whether the buyer and holder class was greater than the seller class as well isn't that a i will say i mean it it is a pretty it is a reasonable inference for virtually any stock plan but to be one of a company of this size to say that the holders vastly outnumber the buyers so so is it fair to say when you talk about meat on the bones i find a little piece of specific meat and that is the word inevitable and if i want to be fair to you which i do  inevitable within a reasonably short time and so we have one or for three for one in the longer run the company benefits from disclosing now number two this is particularly true here words inevitable or nearly inevitable three in the short time and forward there is nothing special about this fund implied that's circuit split we think we win on the question presented the allegations here are generic allegations they could be made in every stock drop case and then if you look at specifics it really falls apart because one specific was net buyer which turns out just isn't true and they're not telling you that it's not true and they've walked away from that and then the other one is this idea well there's the sale that makes it particularly likely well listen to what my friend said he said i b m was looking for a year to try to sell this micro electronics unit the sale itself was hardly inevitable and the allegations of the complaint say that they say it was more likely than not they don't say it was inevitable and implicitly nothing special so you break your point whe answer when you move for summary judgment and if necessary have a trial but the question is if they ask for things they put in the four things we just mentioned and why isn't that fish and and then the rest is up to the defendant to deny whatever it is i don't say there is something special or say say i don't think it's a fish in your honor because you can to be able to make those for allocations in every stock drop case and the whole point i thought factor was two separate merit let's go from plausible sheep and if everything's a sheep then i don't think didn't offer does what it says it's posed to do but so i think we win on the question presented but the reason that we the broader issues is that the longer you hear even the plaintiffs talk about this the more you find there's a fundamental problem here as he said you know they're the principle people who thinks the fiduciary should be looking out for our holders well there's another word for holders their shareholders in the company and the entire purpose of the disclosure regime under the securities law is to make sure that managers of company companies are looking out for the long term interests of shareholders and trying to maximize the value of the company and they're supposed to disclose at certain intervals and not disclose it other intervals they don't have to disclose when they have positive inside information there's a whole body of law that addresses those interests and that's the body of law that should be looked to here one thing i want to be emphatic that i disagree with my friend on the other side is he says that the reason that we want these insiders to service to do series is so they can be sort of canaries in the coal mine they can take early action based on their unique access inside information that is absolutely wrong the whole all these funds are set up to make sure that doesn't happen because if that did happen these would all be late and security violations so the reason just discourse it's that it actually isn't implausible that a manager of to do serious this doesn't know whether they're going to be  to the benefit of the fiduciary i thought you were only liable if you could not have thought it was prudent to say i'm not going to mess with this early disclosure the last thing i want to end with is just there is i don't want there to be a mistake we do not agree with the united states on the bottom line here we do not think that you should engage in a brave new world of hybrid a risk slash securities actions where i agree with my friend lower courts would have to struggle with whether