PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

____________

No. 21-1147

____________

CITY OF WARREN POLICE AND FIRE RETIREMENT 

SYSTEM, Individually and on behalf of all 

others similarly situated,

 Appellant 

v.

PRUDENTIAL FINANCIAL, INC.; CHARLES F. 

LOWREY; KENNETH Y. TANJI; ROBERT M. FALZON

____________

On Appeal from the United States District Court

for the District of New Jersey

(D.C. No. 2-19-cv-20839)

District Judge: Honorable Stanley R. Chesler

____________

Argued: October 27, 2021

Before: GREENAWAY, JR., KRAUSE, and PHIPPS, 

Circuit Judges.

(Filed: June 13, 2023)
2

____________

Joseph D. Daley

ROBBINS GELLER RUDMAN & DOWD

655 West Broadway, Suite 1900

San Diego, CA 92101

Peter S. Pearlman

COHN LIFLAND PEARLMAN HERRMANN & KNOPF

Park 80 West, Plaza One

250 Pehle Avenue, Suite 401

Saddle Brook, NJ 07663

Daniel J. Pfefferbaum [Argued]

Shawn A. Williams 

ROBBINS GELLER RUDMAN & DOWD

One Montgomery Street, Suite 1800

San Francisco, CA 94104

Douglas Wilens

ROBBINS GELLER RUDMAN & DOWD

225 North East Mizner Boulevard, Suite 720

Boca Raton, FL 33432

Counsel for City of Warren Police and Fire 

Retirement System
3

David D. Cramer

Tricia B. O’Reilly

WALSH PIZZI O’REILLY & FALANGA

Three Gateway Center

100 Mulberry Street, 15th Floor 

Newark, NJ 07102

Maeve L. O’Connor [Argued]

Susan R. Gittes

Aasiya F.M. Glover

DEBEVOISE & PLIMPTON

66 Hudson Boulevard

New York, NY 10001

Counsel for Prudential Financial, Inc.; 

Charles F. Lowrey; Kenneth Y. Tanji; and 

Robert M. Falzon

_______________________

OPINION OF THE COURT

_______________________

PHIPPS, Circuit Judge.

Insurance companies typically set aside funds, known as 

reserves, to pay for anticipated benefit claims by their 

policyholders. As an exercise of actuarial judgment, a wide 

range of considerations bear on the determination of the 

amount to hold in reserves. And because circumstances

change, an insurer’s reserves may vary over time. But in this 

case, one of the country’s largest publicly traded life insurance 

companies suddenly announced that it would need to increase 
4

its reserves by $208 million and that, in addition to a one-time 

charge in that amount, its earnings would be reduced by $25 

million per quarter for the foreseeable future. After that news, 

the company’s stock price dropped by more than twelve

percent over two days. 

A municipal retirement system that had purchased the 

company’s common stock before the announcement now 

alleges that the company knew beforehand of problems with 

its reserves and misled investors about those issues. On that 

premise, the retirement system filed this putative class action 

against the company and three of its corporate executives, 

alleging securities fraud under § 10(b) and § 20(a) of the 

Securities Exchange Act of 1934.

In response to the retirement system’s amended complaint, 

the insurance company and the executives moved to dismiss 

for failure to state a claim for relief. They argued that, under 

the heightened pleading standard for securities-fraud claims, 

the retirement system’s complaint failed to plausibly allege

three necessary elements of its claims: false or misleading 

statements; loss causation; and scienter. 

The District Court granted that motion and dismissed the 

complaint with prejudice. It determined that the retirement 

system did not adequately plead falsity, and for that reason, it 

did not evaluate the sufficiency of the complaint’s loss 

causation or scienter allegations. The retirement system then 

brought this appeal.

While most of the District Court’s judgment holds up on de 

novo review, the retirement system’s amended complaint does

contain particularized and plausible allegations of falsity with 

respect to one set of statements by the insurance company. On

a conference call with investors eight weeks before the 

company adjusted its reserves, its Chief Financial Officer 

stated that the recent mortality experience of the company’s

life insurance business was within the “normal” range of 
5

volatility or, at worst, only “slightly negative.” App. at 76–77 

(Am. Compl. ¶ 54 (emphasis removed)). But based on 

information from a confidential former employee, who 

qualifies as credible at the pleading stage, the complaint alleges 

that the insurance company was already contemplating a 

significant increase in reserves due to negative mortality 

experience at the time of the CFO’s statements. And the 

magnitude of the company’s reserve charge and its temporal 

proximity to the CFO’s statements further undercut the CFO’s 

assertion that recent mortality experience was within a normal 

range. Those particularized allegations satisfy the heightened 

standard for pleading falsity, and they plausibly allege the 

falsity of the CFO’s statement.

Accordingly, we will partially vacate the District Court’s 

judgment and remand the case to the District Court to consider 

in the first instance the adequacy of the amended complaint’s

allegations of loss causation and scienter with respect to the 

CFO’s statement.

I. FACTUAL BACKGROUND

(AS ALLEGED IN THE AMENDED COMPLAINT)

Founded over 140 years ago in Newark, New Jersey, 

Prudential Financial, Inc. offers a wide range of financial 

products and services. Those products and services include 

mutual funds, annuities, investment management, and life 

insurance. About ten percent of Prudential’s revenue comes 

from its Individual Life business segment, which offers term, 

variable, and universal life insurance policies. 

As part of its life insurance business, Prudential sets aside 

funds – reserves – to pay death-benefit claims under its 

policies. The amount of those reserves represents a liability for 

future policy benefits on its balance sheet, which Prudential 

publishes in its annual and quarterly reports with the Securities 

and Exchange Commission. To determine the amount to hold 

in reserves, Prudential exercises actuarial judgment in 

consideration of many factors, including policyholder 
6

mortality rates. Typically, during the second quarter of each 

fiscal year, Prudential reevaluates and, if necessary, updates 

the actuarial assumptions underlying those calculations. If the 

amount held in reserves will not cover anticipated death 

benefits, then Prudential increases that amount, and the 

corresponding charge reduces its income. 

In January 2013, Prudential expanded its life insurance 

portfolio by acquiring 700,000 life insurance policies that were 

underwritten by another insurance company, The Hartford. 

Prudential paid $615 million for those policies, referred to as 

the ‘Hartford Block.’ Prudential was then able to collect

premiums from the Hartford Block’s policyholders, but it also 

assumed the obligation to pay the approximately $141 billion 

in death benefits owed under the policies as they came due. By 

2015, Prudential had fully integrated the Hartford Block into 

its Individual Life business segment. 

The Hartford Block proved problematic for Prudential. 

Those policies experienced negative mortality development, 

meaning that policyholders were not living as long as 

predicted, obligating Prudential to pay death benefits sooner 

than expected. As a result of that negative mortality 

development, the Hartford Block “regularly missed internal 

performance expectations” from the time Prudential acquired 

it in 2013. App. at 73 (Am. Compl. ¶ 53(a)). In 2016 and 2017,

Individual Life reported poor results due in large part to one- time adjustments made to integrate the Hartford Block. And, following its annual assumptions review in the second quarter 

of 2018, Prudential announced a $65 million reserve increase 

(and corresponding charge against Individual Life’s income), 

which the company attributed, in part, to updated mortalityrate assumptions. 

The following year, Prudential made several public 

statements that disavowed any serious problems with 

Individual Life. In its 2018 Form 10-K annual report, filed 

with the SEC on February 15, 2019, Prudential explained its 
7

general methodology and procedure for calculating reserves. That annual report further suggested that the amount of its 

reserves was adequate, if not excessive, in light of low interest 

rates. The Form 10-K also reported Prudential’s liability for 

future policy benefits as well as its net income. The next 

month, in a meeting with analysts from the Credit Suisse 

investment bank, the Vice Chairman of Prudential Financial 

and Prudential Insurance, Robert M. Falzon, similarly assured 

investors that there were no systemic issues with underwriting 

or mortality assumptions in Individual Life. On May 3,

Prudential filed its Form 10-Q for the first quarter of 2019 with 

the SEC, and that document, in reporting the company’s net 

income and providing its end-of-quarter balance sheets, 

disclosed no problems with the reserves for Individual Life. 

And on June 5, during an Investor Day conference call, 

Prudential’s CFO, Kenneth Y. Tanji, described Individual 

Life’s recent mortality experience as within the range of 

“normal volatility” or, at worst, only “slightly negative.” Id. at 

76–77 (Am. Compl. ¶ 54 (emphasis removed)). 

But eight weeks after that Investor Day call, Prudential 

disclosed a significant adjustment to its reserves. In a July 31 

press release – issued after the stock market had closed –

Prudential announced that, due to unfavorable updates to its 

mortality assumptions, it would charge $208 million to 

Individual Life’s income to supplement its reserves. By 

Prudential’s own benchmarks, a reserve charge of that size was 

unusual. In a Form 8-K that Prudential had previously filed 

with the SEC in December 2018, the company reported that 

negative mortality within one standard deviation from 

expectation would reduce Individual Life’s annual pre-tax 

adjusted operating income by a comparatively smaller amount 

– between $55 million and $80 million. The $208 million 

adjustment to reserves, along with other unfavorable 

developments, drove Individual Life to report an adjusted 

operating loss of $135 million for the second quarter of 2019 – far below the company’s expected quarterly income of $108 

million. 
8

The analyst community immediately criticized the timing 

of Prudential’s announcement. In a report issued the evening 

of July 31, one investment bank opined that Prudential “should 

have used its June investor day to lay out the new disclosure 

and reset the bar at that point.” Id. at 81–82 (Am. Compl. ¶ 61 

(emphasis removed)). Another report issued that same night 

predicted that “investors will most likely be surprised since this 

came so close to [Prudential’s] investor day in June.” Id. at 82

(Am. Compl. ¶ 62 (emphasis removed)). 

The next day, three of Prudential’s officers held a 

conference call with analysts to discuss the company’s 

quarterly results. Those officers explained that the company’s 

revised mortality assumptions “related to the longer-dated 

vintages” in Individual Life, a seeming reference, at least in 

part, to the Hartford Block. Id. at 84 (Am. Compl. ¶ 66

(emphasis removed)). They also previewed that the updated 

mortality assumptions, which led to the $208 million charge, would continue to reduce Individual Life’s earnings by “about 

$25 million a quarter . . . for the foreseeable future.” Id. (Am. 

Compl. ¶ 65 (emphasis removed)). 

On August 2, in its Form 10-Q for the second quarter of 

2019, Prudential also commented on the reserve charge. 

Specifically, it stated that the reserve charge was “mainly 

driven by unfavorable impacts related to mortality rate 

assumptions.” Id. at 88 (Am. Compl. ¶ 72 (emphasis 

removed)).

In line with the analyst community’s reaction, the market

did not respond favorably to Prudential’s announcements. On 

July 31, the price of Prudential’s common stock closed at 

$101.31 per share. But on August 1, following Prudential’s 

after-hours press release the evening before, the stock closed at 

$91.09 per share on heavy trading volume. The stock 

continued to drop the next day, closing at $88.56 per share on 

August 2. In those two days of trading, Prudential lost about 

one-eighth of its market capitalization. 
9

II. PROCEDURAL HISTORY

After the drop in stock price, two of Prudential’s 

shareholders – the City of Warren Police and Fire Retirement 

System (the ‘Warren Retirement System’) and Donald P. 

Crawford – separately initiated class actions against Prudential 

for making false or misleading statements related to the 

company’s life insurance reserves. They sued under the 

Securities Exchange Act of 1934, which regulates the trading 

of securities on the secondary market. See Pub. L. No. 73-291, 

48 Stat. 881 (codified as amended at 15 U.S.C. § 78a et seq.). 

The centerpiece of the 1934 Act’s antifraud framework, 

§ 10(b), prohibits the use of “any manipulative or deceptive 

device or contrivance” in violation of regulations promulgated 

by the SEC. 15 U.S.C. § 78j(b). And under one of the SEC’s 

regulations, Rule 10b-5, it is illegal “[t]o make any untrue 

statement of a material fact or to omit to state a material fact 

necessary in order to make the statements made, in the light of 

the circumstances under which they were made, not 

misleading.” 17 C.F.R. § 240.10b-5(b). 

Together, § 10(b) and Rule 10b-5 imply a private cause of 

action for securities fraud. See Basic Inc. v. Levinson, 485 U.S. 

224, 230–31 (1988) (“Judicial interpretation and application, 

legislative acquiescence, and the passage of time have removed 

any doubt that a private cause of action exists for a violation of 

§ 10(b) and Rule 10b-5 . . . .”). That claim has six elements: 

(i) a misrepresentation or omission of material fact; 

(ii) scienter; (iii) a connection with the purchase or sale of a 

security; (iv) reliance; (v) economic loss; and (vi) loss 

causation. See Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 

341–42 (2005); Fan v. StoneMor Partners LP, 927 F.3d 710, 

714 (3d Cir. 2019). Both the Warren Retirement System and 

Crawford pursued such a claim against Prudential, as well as 

against its Chief Executive Officer, Charles F. Lowrey, and its 

Chief Financial Officer, Kenneth Y. Tanji. They also brought 

claims under § 20(a) of the 1934 Act, which imposes joint and 

several liability on persons who control an individual or entity 

that violates § 10(b) and Rule 10b-5. See 15 U.S.C. § 78t(a);
10

Williams v. Globus Med., Inc., 869 F.3d 235, 246 (3d Cir. 

2017) (“Section 20(a) of the Securities Exchange Act permits 

plaintiffs to bring a cause of action against individuals who 

control a corporation that has violated Section 10(b).” (citing 

15 U.S.C. § 78t(a))). 

Exercising jurisdiction over those suits, see 15 U.S.C. 

§ 78aa(a), the District Court consolidated the actions and 

appointed the Warren Retirement System as lead plaintiff, see 

id. § 78u-4(a)(3). After that appointment, the Warren 

Retirement System filed an amended complaint, which, among 

other things, added § 10(b) and § 20(a) claims against 

Prudential’s Vice Chairman, Robert M. Falzon. The Warren 

Retirement System also sought to represent a class of persons 

who, like it, bought Prudential’s common stock between 

February 15, 2019, the date of the first alleged 

misrepresentation, and August 2, 2019, the second day that the

company’s stock price dropped following Prudential’s 

corrective disclosures. 

In response, Prudential and the individual defendants 

moved to dismiss the amended complaint for failure to state a 

claim for relief. In that motion, they argued that the Warren

Retirement System failed to adequately allege three essential 

elements of its securities-fraud claims: a misrepresentation or 

omission of material fact, scienter, and loss causation. 

The District Court granted the motion on the ground that

the complaint did not plausibly allege that any of Prudential’s 

class-period statements were false or misleading. See In re 

Prudential Fin., Inc. Sec. Litig., 2020 WL 7706860, at *15 

(D.N.J. Dec. 29, 2020). Reasoning that any attempt to further 

amend would be futile, the District Court dismissed the 

amended complaint with prejudice without addressing scienter

or loss causation. See id. The Warren Retirement System 

timely appealed the resulting order of dismissal, bringing the 

case within this Court’s appellate jurisdiction. See 28 U.S.C. 

§ 1291.
11

III. DISCUSSION

By virtue of Civil Rule 9(b) and the Private Securities 

Litigation Reform Act of 1995 (the ‘PSLRA’), heightened 

pleading standards govern securities-fraud claims brought 

under § 10(b) and Rule 10b-5. See Fed. R. Civ. P. 9(b); Pub. 

L. No. 104-67, 109 Stat. 737 (codified as amended in various 

sections of Title 15 of the United States Code). These 

heightened standards share a common foundation with the 

ordinary pleading standards in that speculative or threadbare 

allegations along with legal conclusions are disregarded, and 

the remaining allegations are generally taken as true. See 

Tellabs, Inc. v. Makor Issues & Rts., Ltd., 551 U.S. 308, 322 

(2007); Lutz v. Portfolio Recovery Assocs., LLC, 49 F.4th 323, 

327–28 (3d Cir. 2022). But due to Rule 9(b) and the PSLRA, 

a securities-fraud complaint must contain more than “a short 

and plain statement of the claim showing that the pleader is 

entitled to relief,” Fed. R. Civ. P. 8(a)(2); it must include 

particularized allegations of fraud. See Tellabs, 551 U.S. at 

319; Fed. R. Civ. P. 9(b); 15 U.S.C. § 78u-4(b)(1)–(2).

To plead falsity, Rule 9(b) and the PSLRA each demand 

specificity. Rule 9(b) requires that a fraud plaintiff “state with 

particularity the circumstances constituting fraud.” Fed. R. 

Civ. P. 9(b). Under that standard, the complaint must describe

the time, place, and contents of the false representations or 

omissions, as well as the identity of the person making the 

statement and the basis for the statement’s falsity. See

Institutional Invs. Grp. v. Avaya, Inc., 564 F.3d 242, 253 (3d 

Cir. 2009) (explaining the Rule 9(b) pleading standard as 

requiring “the who, what, when, where and how” (quoting In 

re Advanta Corp. Sec. Litig., 180 F.3d 525, 534 (3d Cir. 1999), 

abrogated on other grounds by Tellabs, 551 U.S. at 323–34)); 

5A Charles Alan Wright, Arthur R. Miller & A. Benjamin 

Spencer, Federal Practice & Procedure § 1297 (4th ed. 2022). Like Rule 9(b), the PSLRA requires the pleadings to identify

“each statement alleged to have been misleading” and to 

specify “the reason or reasons why the statement is 

misleading.” 15 U.S.C. § 78u-4(b)(1); see also City of 
12

Cambridge Ret. Sys. v. Altisource Asset Mgmt. Corp., 908 F.3d 

872, 881 n.7 (3d Cir. 2018) (“In general, a complaint that 

satisfies the PSLRA’s heightened pleading standards will also 

satisfy Rule 9(b)’s requirements.”). And if allegations of 

falsity are based on information and belief, instead of on 

“evidentiary support,” Fed. R. Civ. P. 11(b)(3), the PSLRA 

requires the complaint to plead, with particularity, facts 

“sufficient to support a reasonable belief as to the misleading 

nature of the statement or omission” before the allegations can 

be accepted as true. Cal. Pub. Emps.’ Ret. Sys. v. Chubb Corp., 

394 F.3d 126, 147 (3d Cir. 2004) (quoting Novak v. Kasaks, 216 F.3d 300, 314 n.1 (2d Cir. 2000)); see also 15 U.S.C.

§ 78u-4(b)(1). For example, even at the pleading stage, 

information provided by confidential witnesses is subject to a 

steep discount when the source is not credible or reliable. See 

Rahman v. Kid Brands, Inc., 736 F.3d 237, 244 (3d Cir. 2013); 

Chubb, 394 F.3d at 147; see also Avaya, 564 F.3d at 263

(recognizing that anonymity alone is not a basis for rejecting 

allegations by confidential witnesses that are otherwise 

reliable).1

 

Upon a motion by any defendant, a claim for securities 

fraud under § 10(b) and Rule 10b-5 that lacks particularized 

allegations of falsity must be dismissed. See 15 U.S.C. § 78u4(b)(3)(A) (requiring the dismissal of a complaint that fails to 

1 Although the pleading standards in Rule 9(b) and the PSLRA 

can be generally reconciled harmoniously for allegations of 

falsity, the PSLRA’s requirements for allegations of scienter

control over the more lenient standard in Rule 9(b) for mental- state allegations. See Avaya, 564 F.3d at 253 (“The PSLRA’s 

requirement for pleading scienter . . . marks a sharp break with 

Rule 9(b).”); Tellabs, 551 U.S. at 323–24. Compare Fed. R. 

Civ. P. 9(b) (permitting “[m]alice, intent, knowledge, and other 

conditions of a person’s mind [to] be alleged generally”), with

15 U.S.C. § 78u-4(b)(2)(A) (requiring a particularized 

statement of the “facts giving rise to a strong inference that the 

defendant acted with the required state of mind”). 
13

satisfy the PSLRA’s pleading rules); In re Rockefeller Ctr. 

Props., Inc. Sec. Litig., 311 F.3d 198, 224 (3d Cir. 2002) 

(recognizing that Rule 9(b) and the PSLRA “impose 

independent, threshold pleading requirements that, if not met, 

support dismissal apart from Rule 12(b)(6)”). But even if 

falsity is pleaded with the requisite particularity, those factual 

allegations must still satisfy the plausibility standard, which 

requires a “reasonable expectation that discovery will reveal 

evidence” of the necessary elements of the claim. Bell Atl. 

Corp. v. Twombly, 550 U.S. 544, 556 (2007); see also In re 

Synchrony Fin. Sec. Litig., 988 F.3d 157, 161, 169 (2d Cir. 

2021) (examining whether the complaint’s “particularized 

allegations plausibly allege” a false or misleading statement); 

United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 186

(5th Cir. 2009) (“Rule 9(b) . . . requires only ‘simple, concise, 

and direct’ allegations of the ‘circumstances constituting 

fraud,’ which after Twombly must make relief plausible . . . .”); 

see generally 5A Charles Alan Wright, Arthur R. Miller & 

A. Benjamin Spencer, Federal Practice & Procedure § 1298 

(4th ed. 2022) (explaining that the requirement in Rule 9(b) to 

plead with particularity “must be read in conjunction with” the 

plausibility pleading standard). Thus, Rule 9(b) and the 

PSLRA do not insist upon irrefutable evidence of a statement’s 

falsity at the pleading stage; rather, a complaint must contain 

particularized factual allegations that plausibly allege that a 

statement was misleading. 

On appeal, the Warren Retirement System argues that the 

District Court erred in dismissing its securities-fraud claims for 

failing to plead falsity. It identifies four sets of statements that 

it contends are pleaded with particularity and are plausibly 

false or misleading: (i) the statements in Prudential’s 2018 

Form 10-K regarding company’s methodology for updating its 

reserves, (ii) the statements about the adequacy of Prudential’s

reserves, which render false or misleading the financial 

disclosures in its 2018 Form 10-K and in its first-quarter 2019 

Form 10-Q, (iii) the statement by Prudential’s Vice Chairman, 

Robert M. Falzon, to Credit Suisse analysts in March 2019,
14

which declared that there were no “systemic issues” with the 

company’s underwriting practices or mortality assumptions,

App. at 67–68 (Am. Compl. ¶ 43), and (iv) the statements by 

Prudential’s CFO, Kenneth Y. Tanji, on June 5, 2019, during 

the company’s Investor Day conference regarding Prudential’s 

recent mortality experience being within a normal range or at 

worst, only slightly negative. As a fallback, the Warren 

Retirement System argues that the District Court abused its 

discretion by not permitting it to amend its complaint for a 

second time to augment its allegations of falsity. 

A. Statements Regarding Prudential’s ReserveSetting Methodology

The Warren Retirement System argues that it adequately 

pleaded the falsity of two statements concerning Prudential’s 

methodology for determining and updating its reserves. While 

the amended complaint identifies the statements with 

particularity and provides reasons for their falsity, those 

allegations fail to plausibly demonstrate that Prudential 

misrepresented its methodology for setting reserves.

In satisfaction of Rule 9(b) and the PSLRA, the amended 

complaint alleges with particularity the circumstances 

surrounding the statements about Prudential’s reserve-setting 

methodology. Prudential made the two statements in its 2018 

Form 10-K, which was filed with the SEC on February 15, 

2019. One of the statements in that annual report disclosed that 

Prudential’s actuarial “assumptions used in establishing 

reserves are generally based on [its] experience, industry 

experience, and/or other factors, as applicable.” App. at 64

(Am. Compl. ¶ 37 (emphasis removed)). Another statement 

was an assurance that although Prudential typically updates its 

actuarial assumptions (including those relating to mortality) 

once a year, the company would make an earlier adjustment if 

“a material change is observed in an interim period that [it] 

feel[s] is indicative of a long-term trend.” Id. at 65 (Am. 

Compl. ¶ 38 (emphasis removed)). 
15

The Warren Retirement System also articulates the reason 

for each statement’s falsity. The amended complaint alleges 

that Prudential’s description of its reserve-setting methodology 

was misleading because Prudential ignored the negative 

mortality experience in the Hartford Block when setting its 

reserves. Similarly, the amended complaint alleges that 

Prudential’s assurance that it would revisit its mortality 

assumptions in an interim period to reflect any material 

changes created the false impression that no such changes had 

occurred since its 2018 annual review. 

Although the Warren Retirement System identifies the 

allegedly false statements with particularity, that is not enough 

to survive a motion to dismiss. The allegations in the amended 

complaint must still be plausible. See City of Cambridge Ret. 

Sys., 908 F.3d at 879 n.6; In re Synchrony, 988 F.3d at 161, 

169. Under that standard, the Warren Retirement System must 

demonstrate that discovery would be reasonably likely to 

reveal evidence of the falsity of the two statements. See

Twombly, 550 U.S. at 556; Lutz, 49 F.4th at 328. And the 

allegations in the amended complaint fail to do so.

The first statement was that Prudential’s assumptions are 

generally based on a variety of factors, one of which is its 

applicable experience. To allege the plausible falsity of this 

statement, the Warren Retirement System must provide facts 

showing that Prudential did not generally consider a variety of 

factors, including its applicable experience, in updating its 

mortality assumptions. But by its own terms, the amended 

complaint undermines that effort. It alleges that Prudential 

used its experience – including with the Hartford Block – to 

update mortality assumptions. See App. at 74 (Am. Compl. 

¶ 53(c)) (“Prudential evaluated mortality experience at least 

quarterly as it was a key component of Individual Life’s 

business performance.” (emphasis added)); id. at 64, 73–74 

(Am. Compl. ¶¶ 36, 53(a), (d)) (alleging that the “Hartford 

[B]lock was closely monitored,” separately forecasted, and that 

updates to mortality assumptions had prompted a $65 million 
16

reserve charge following Prudential’s 2018 annual review).

The pleading also alleges that Prudential “was particularly 

focused on the financial impact of quarterly mortality 

experience,” including the Hartford Block’s experience, and 

was willing to update its mortality assumptions, and by 

extension its reserves, based on that experience. Id. at 74 (Am. 

Compl. ¶ 53(c)). These allegations undercut any reasonable

likelihood that discovery would reveal that Prudential did not 

consider its experience with the Hartford Block, or its 

experience generally, in calibrating its mortality assumptions. 

The amended complaint likewise fails to allege the 

plausible falsity of Prudential’s assurance about updating its 

mortality assumptions on an interim basis. By its terms, that 

statement conditioned the promise of interim updates on

Prudential’s observation of a “material change” that it 

perceived as “indicative of a long-term trend.” Id. at 65 (Am. 

Compl. ¶ 38 (emphasis removed)). The Warren Retirement 

System, however, does not allege that between mid-2018 

(when Prudential took a $65 million reserve charge based on 

updated mortality assumptions) and February 2019 (when it 

filed the Form 10-K), the company observed additional 

negative mortality developments within the Hartford Block 

that were so severe as to constitute a material change in the 

assumptions about Individual Life’s reserves, which had been 

increased less than a year earlier. The amended complaint 

contains even less support for the proposition that Prudential 

perceived the pre-February 2019 mortality experience within 

the Hartford Block as indicative of a long-term trend in

Individual Life requiring an immediate assumptions update. 

Instead, as the District Court succinctly observed, the Warren 

Retirement System’s theory of falsity “elides the difference 

between short-term mortality experience in one group of 

policies and long-term trends for Individual Life as a whole.” 

In re Prudential, 2020 WL 7706860, at *13. 

For these reasons, the amended complaint does not 

plausibly allege falsity with respect to Prudential’s statements 
17

about its reserve-setting methodology. And because the 

Warren Retirement System did not propose any additional 

facts that would demonstrate the plausible falsity of 

Prudential’s stated methodology, either before the District 

Court or on appeal, the District Court did not abuse its 

discretion in denying leave to amend this part of the claim. See 

City of Cambridge Ret. Sys., 908 F.3d at 879 n.6 (explaining 

that denial of leave to amend is proper when “the complaint ‘would not survive a Rule 12(b)(6) motion even if pled with 

more particularity’” (quoting In re Burlington Coat Factory 

Sec. Litig., 114 F.3d 1410, 1435 (3d Cir. 1997))); In re 

Allergan ERISA Litig., 975 F.3d 348, 357 (3d Cir. 2020)

(affirming a denial of leave to amend because the plaintiffs 

gave the district court “no hint as to how they would further 

amend their complaint”); In re Adams Golf, Inc. Sec. Litig., 381 F.3d 267, 280 (3d Cir. 2004) (affirming a denial of leave 

to amend because the “proposed amendments would not have 

remedied the pleading deficiencies”). 

B. Prudential’s Statements Regarding the 

Adequacy of its Reserves

The Warren Retirement System also contends that it 

properly pleaded the falsity of a group of Prudential’s 

statements related to the adequacy of its reserves. Although 

the amended complaint provides the particularity required by 

Rule 9(b) and the PSLRA about the circumstances of those 

statements, the challenged statements are opinions that also are 

not actionable. 

The Warren Retirement System identifies with particularity 

Prudential’s statements about the adequacy of its reserves. 

Prudential made those statements in two public filings with the 

SEC: its 2018 Form 10-K, filed on February 15, 2019, and its 

Form 10-Q for the first quarter of 2019, filed on May 3, 2019. 

Those reports disclosed, among other things, the company’s 

earnings per share and net income for the prior quarter, and 

they included the company’s end-of-period balance sheets. 

The balance sheets reported the company’s liabilities, which 
18

included the amount held in reserves. Without any qualifiers 

or annotations, the identification of those amounts implied

their adequacy as reserves. And in its Form 10-K, Prudential 

stated that in light of low interest rates, there was “an increased 

likelihood that the reserves determined based on best estimate 

assumptions may be greater than the net liabilities.” App. at 

66 (Am. Compl. ¶ 39 (emphasis removed)).

As far as the basis for the falsity of those statements, the 

amended complaint relies on information from confidential 

former employees. Those sources report that at the same time 

as Prudential made those filings with the SEC, the Hartford 

Block was experiencing consistently negative mortality. On 

that ground, the Warren Retirement System postulates that

Prudential’s reserves were inadequate. At the very least, the 

Warren Retirement System contends, Prudential’s omission of 

the Hartford Block’s negative mortality gave investors false 

confidence in the company’s reserves and rendered misleading 

the suggestion in its Form 10-K that it was over-reserved. 

Those particularized statements about the adequacy of 

Prudential’s reserves are opinions. As the Supreme Court has 

explained, “[a]n opinion is ‘a belief[,] a view,’ or a ‘sentiment 

which the mind forms of persons or things,’” whereas a fact is 

a “‘thing done or existing’ or ‘[a]n actual happening.’” 

Omnicare, Inc. v. Laborers Dist. Council Const. Indus. 

Pension Fund, 575 U.S. 175, 183 (2015) (quoting Webster’s 

New International Dictionary 782, 1509 (1927)). And the 

setting of reserves reflects an insurer’s actuarial judgment,

based on a variety of complex assumptions and considerations, of the amount that it must set aside to pay claims by 

policyholders. See Shapiro v. UJB Fin. Corp., 964 F.2d 272, 

281 (3d Cir. 1992) (observing that there is “no single method 

of evaluating and setting loan loss reserves” and cautioning 

that “the economic judgments made in setting [such] reserves 

can be validated only at some future date”). Thus, when the

stated amount of reserves is challenged, not on the factual 

ground that the indicated amount is not actually set aside, but 
19

for the sufficiency of that set-aside to pay claims by 

policyholders, the stated reserve amount, as a manifestation of 

actuarial judgment, functions as an opinion. See Fait v. 

Regions Fin. Corp., 655 F.3d 105, 112–13 (2d Cir. 2011) 

(analyzing statements regarding the adequacy of loan loss 

reserves as opinions), abrogated on other grounds by 

Omnicare, 575 U.S. at 184–89. Similarly, when a claim 

against an insurance company for false or misleading financial 

statements hinges on an opinion about the adequacy of 

reserves, those financial statements should be treated as 

opinions too.

1. Opinion Falsity Under § 10(b) and 

Rule 10b-5.

Although the challenged statements are opinions, they may 

still be false or misleading. In a case arising under § 11 of the 

Securities Act of 1933,2 Omnicare, Inc. v. Laborers District 

Council Construction Industry Pension Fund, 575 U.S. 175 

(2015), the Supreme Court identified three scenarios in which 

an opinion may be false or misleading. First, because every 

statement of opinion “explicitly affirms one fact: that the 

speaker actually holds the stated belief,” an insincere statement 

of the speaker’s opinion qualifies as a misrepresentation. Id. at 

184. Second, opinion statements that contain expressly 

“embedded” factual assertions are misleading if any of the 

embedded factual assertions are untrue. Id. at 185–86. The 

third scenario involves omissions that render opinion 

statements misleading: if, under the circumstances in which it 

is given, an opinion reasonably implies facts that are untrue, 

then, without a qualifying statement regarding those facts, the 

opinion is misleading. See id. at 188–89.

Unlike Omnicare, this case involves claims under § 10(b)

of the 1934 Act and Rule 10b-5. And this Circuit has not 

2 Pub. L. No. 73-22, 48 Stat. 74 (codified as amended at 

15 U.S.C. § 77a et seq.).
20

precedentially addressed the applicability of Omnicare’s 

opinion-falsity framework to claims under § 10(b) for 

violations of Rule 10b-5. But this Court has assumed that 

Omnicare applies to proxy-fraud claims under § 14(a) of the 

1934 Act. See Jaroslawicz v. M&T Bank Corp., 962 F.3d 701, 

717 & n.16 (3d Cir. 2020) (observing that “[t]he Supreme 

Court’s decision in Omnicare provides the relevant 

framework” for assessing the falsity of opinion statements 

under § 14(a)). More broadly, every other Court of Appeals to 

encounter the issue has applied the Omnicare framework for 

opinion falsity to claims for Rule 10b-5 violations. See Emps.’ 

Ret. Sys. of the City of Baton Rouge & Par. of E. Baton Rouge 

v. MacroGenics, Inc., 61 F.4th 369, 386–91 (4th Cir. 2023);

Constr. Indus. & Laborers Joint Pension Tr. v. Carbonite, Inc., 

22 F.4th 1, 7 (1st Cir. 2021); Carvelli v. Ocwen Fin. Corp., 934 F.3d 1307, 1322 n.7 (11th Cir. 2019); City of Dearborn 

Heights Act 345 Police & Fire Ret. Sys. v. Align Tech., Inc., 

856 F.3d 605, 616 (9th Cir. 2017); Tongue v. Sanofi, 816 F.3d 

199, 209–10 (2d Cir. 2016); Nakkhumpun v. Taylor, 782 F.3d 

1142, 1159 (10th Cir. 2015). 

We join that consensus: Omnicare’s framework for 

evaluating opinion falsity applies to claims under § 10(b) for 

violations of Rule 10b-5. Although differences exist between 

§ 11 and Rule 10b-5,

3 the two provisions use almost identical 

language in prohibiting misrepresentations and omissions. 

Compare 15 U.S.C. § 77k(a) (creating liability for registration 

statements that “contained an untrue statement of a material 

fact or omitted to state a material fact required to be stated 

therein or necessary to make the statements therein not 

misleading”), with 17 C.F.R. § 240.10b-5(b) (making it illegal 

3 Unlike Rule 10b-5, § 11 applies only to registration 

statements, and it lacks scienter and loss-causation 

requirements. See Obasi Inv. LTD v. Tibet Pharms., Inc., 931 F.3d 179, 182 (3d Cir. 2019) (observing that § 11 

“imposes near-strict liability for untruths and omissions made 

in a registration statement”). 
21

“[t]o make any untrue statement of a material fact or to omit to 

state a material fact necessary in order to make the statements 

made, in the light of the circumstances under which they were 

made, not misleading”). That textual congruence strongly 

suggests that the SEC, in promulgating Rule 10b-5, intended 

to employ the same standard for falsity as Congress used when 

enacting § 11. Cf. Antonin Scalia & Bryan A. Garner, Reading 

Law: The Interpretation of Legal Texts 323 (2012) (“[W]hen a 

statute uses the very same terminology as an earlier statute –

especially in the very same field, such as securities law . . . – it 

is reasonable to believe that the terminology bears a consistent 

meaning.” (emphasis added)). 

Relatedly, this Circuit has already held that § 11 and Rule 

10b-5 share the same standard of materiality for misleading 

statements. See In re Merck & Co., Inc. Sec. Litig., 432 F.3d 

261, 273–75 (3d Cir. 2005) (reaffirming that “[s]ections 11 and 

10(b) share the materiality element and the [same] materiality 

definition”); In re Donald J. Trump Casino Sec. Litig.-Taj 

Mahal Litig., 7 F.3d 357, 369 (3d Cir. 1993) (observing that 

§ 10(b), Rule 10b-5, § 11, and § 12(2) all share the same 

standard of materiality). And in prior precedent, this Circuit 

prefigured the Omnicare framework by recognizing that, for 

purposes of Rule 10b-5 violations, opinion statements are 

misleading when “issued without a genuine belief or 

reasonable basis.” In re Merck & Co., Inc. Sec., Derivative & 

“ERISA” Litig., 543 F.3d 150, 166 (3d Cir. 2008) (quoting 

Herskowitz v. Nutri/System, Inc., 857 F.2d 179, 185 (3d Cir.

1988)); see also City of Edinburgh Council v. Pfizer, Inc., 

754 F.3d 159, 170 (3d Cir. 2014).

In sum, Omnicare is best viewed as a more developed 

articulation of that principle so that for claims under § 10(b)

and Rule 10b-5, an opinion statement is misleading if it: (i) was 

not sincerely believed when made; (ii) contains an expressly 

embedded, untrue factual assertion; or (iii) reasonably implies 

untrue facts and omits appropriate qualifying language.
22

2. None of the challenged opinion 

statements in this case fit within any of 

Omnicare’s categories of false or 

misleading opinions.

For the first Omnicare category, the amended complaint 

does not contain plausible allegations that Prudential did not 

sincerely hold its opinion about the adequacy of its reserves. 

At most, the amended complaint relies on reports by three 

confidential former employees for the proposition that one 

subset of Individual Life’s portfolio, the Hartford Block, 

experienced negative mortality during 2018 and 2019. But 

even assuming, for the sake of argument, the credibility of 

those sources, see Avaya, 564 F.3d at 263, their accounts fail 

to show that Prudential, at least prior to conducting its secondquarter actuarial assumptions review, believed the Hartford 

Block’s problems had affected Individual Life to the point that 

the reserves for that entire business segment were deficient. 

See Williams, 869 F.3d at 246 (“[A]ctual knowledge that sales 

from one source might decrease is not the same as actual 

knowledge that the company’s overall sales projections are 

false.” (emphasis added)). And because the challenged 

statements were made before the alleged second-quarter 

review of actuarial assumptions could be reasonably inferred 

to have discovered any problems, the Warren Retirement 

System does not provide a basis for plausibly concluding that 

Prudential did not sincerely believe the adequacy of its reserve 

amounts as it reported them on its SEC filings. 

For the second Omnicare scenario, the challenged 

statements have no expressly embedded factual assertions that 

are untrue. The statement of a likelihood of being overreserved has only two embedded factual statements: that 

interest rates were low, and that Prudential held reserves at all. 

The truthfulness of both of those statements is undisputed. 

Nor are the challenged statements misleading under the

falsity-by-omission scenario described in Omnicare. The 

Warren Retirement System’s omission argument rests on 
23

information from confidential former employees that the 

Hartford Block had a consistently negative mortality 

experience, and the Warren Retirement System contends that 

Prudential should have disclosed that issue. Even without 

examining whether that confidential-source information 

should be discounted, the recognition that the alleged negative 

mortality in the Hartford Block would tend to increase the 

amount of needed reserves would be, at most, only one of many 

factors that Prudential considered in setting its reserves. And 

because “[r]easonable investors understand that opinions 

sometimes rest on a weighing of competing facts,” an opinion 

statement is “not necessarily misleading when an issuer knows, 

but fails to disclose, some fact cutting the other way.” 

Omnicare, 575 U.S. at 189–90. Thus, without an 

accompanying allegation that the negative mortality in the 

Hartford Block was so great that it would, for a reasonable 

investor, eclipse the balance of the numerous other 

considerations used to set reserves for all of Individual Life, the omission of that fact from Prudential’s Forms 10-K and 

10-Q does not make the challenged opinions in those filings 

misleading. See id. at 190 (“A reasonable investor does not 

expect that every fact known to an issuer supports its opinion 

statement.”); Chubb, 394 F.3d at 156 (explaining that 

“anecdotal examples” of individual policies’ poor performance 

did not demonstrate that the broader business was failing).

For these reasons, the Warren Retirement System does not 

allege circumstances under which Prudential’s statements 

concerning the adequacy of its reserves were plausibly false or 

misleading opinions under any of the scenarios identified in 

Omnicare. Because the Warren Retirement System does not 

propose any allegations that would bring the company’s 

statements regarding the adequacy of its reserves within any of 

the three Omnicare scenarios, the District Court did not abuse 

its discretion in denying a second opportunity to amend the 

complaint in this respect.
24

C. The Reference to Falzon’s No-Systemic-Issues 

Statement in the Credit Suisse Analyst Report

The Warren Retirement System also premises its securities- fraud claims upon a statement allegedly made by Prudential’s 

Vice Chairman, Robert M. Falzon. As required by Rule 9(b) 

and the PSLRA, the amended complaint identifies the 

circumstances surrounding that statement with particularity. 

According to a March 31 analyst report from the Credit Suisse 

investment bank, Falzon stated three days earlier, at a meeting 

with analysts, that “there are no systemic issues with 

underwriting or mortality assumptions.” App. at 67–68 (Am. 

Compl. ¶ 43) (emphasis removed). The amended complaint 

also provides the Warren Retirement System’s reason for the 

falsity of Falzon’s statement. That rationale depends on 

information from three confidential witnesses, who as former 

Prudential employees, assert that the Hartford Block was “not 

priced to cover the adverse mortality trends being experienced” 

and that Prudential was powerless to increase the premiums on 

those policies. Id. at 73–74 (Am. Compl. ¶ 53(b)). Based on 

that information, the Warren Retirement System contends that, 

contrary to Falzon’s assurances, there were systemic issues 

with Prudential’s underwriting practices and mortality 

assumptions. 

The District Court rejected Credit Suisse’s report of 

Falzon’s statement as a basis for a Rule 10b-5 claim against 

Prudential. See In re Prudential, 2020 WL 7706860, at *14. It 

reasoned that because the statement, which was a paraphrasing, 

not a direct quotation, appeared in an analyst report, it was not 

‘made’ by Falzon or Prudential for purposes of Rule 10b-5. 

See id.; see also 17 C.F.R. § 240.10b-5(b) (“It shall be 

unlawful for any person, directly or indirectly, . . . [t]o make

any untrue statement of a material fact . . . .” (emphasis 

added)). In reaching that conclusion, the District Court relied 

on Janus Capital Group, Inc. v. First Derivative Traders, 

564 U.S. 135 (2011), for the proposition that Falzon could not 

have made the statement because he did not “control[] the 

content of the report.” In re Prudential, 2020 WL 7706860, at 
25

*14 (citing Janus, 564 U.S. at 142 (“Without control, a person 

or entity can merely suggest what to say, not ‘make’ a 

statement in its own right.”)). That reasoning is incorrect, but 

inconsequential here. See TD Bank N.A. v. Hill, 928 F.3d 259, 

270 (3d Cir. 2019) (recognizing that this Court “may affirm on 

any basis supported by the record, even if it departs from the 

District Court’s rationale”).

Janus announced two important points of law regarding the 

maker of a statement for purposes of Rule 10b-5. First, it held 

that for a person or entity to ‘make’ a statement, that person or 

entity must have “ultimate authority over the statement, 

including its content and whether and how to communicate it.” 

Janus, 564 U.S. at 142. Second, Janus emphasized the role of 

attribution in determining a statement’s maker: “attribution 

within a statement or implicit from surrounding circumstances 

is strong evidence that a statement was made by – and only by 

– the party to whom it is attributed.” Id. at 142–43. Applying 

those principles to allegedly false statements in a mutual fund’s 

prospectuses, the Supreme Court concluded that an investment 

advisor for the mutual fund – even if it were “significantly 

involved in preparing the prospectuses” – did not ‘make’ the 

challenged statements because the prospectuses did not 

attribute the statements to the fund advisor and because only 

the mutual fund, not the advisor, had the statutory obligation to 

issue the prospectuses. See id. at 146–48.

Those two Janus principles lead to a different conclusion 

here: Prudential, through Falzon, made the no-systemic-issues 

statement. The allegations about the contents of Falzon’s 

statement and its attribution to him are not based on 

information and belief, and they do not rely on confidential 

sources. So even under the PSLRA’s heightened pleading 

standard for falsity, see 15 U.S.C. § 78u-4(b); Avaya, 564 F.3d 

at 252–53, nothing more is needed to accept those allegations 

as true at this stage. From that perspective, the challenged 

statement is sufficiently attributed to Falzon – Credit Suisse 

identifies him by name as the speaker. See ESG Cap. Partners, 
26

LP v. Stratos, 828 F.3d 1023, 1033 (9th Cir. 2016) (explaining 

that “attributing a statement to another party generally 

indicates that party as the ‘maker’ of the statement” for Rule 

10b-5 purposes under Janus). And with Falzon’s position as 

Vice Chairman and the surrounding context of the statement –

that it was made at a meeting where Prudential’s management 

discussed the company’s financial condition with outside 

analysts – the amended complaint allows the reasonable 

inference that Falzon (not Credit Suisse’s analysts) had 

“ultimate authority” on behalf of Prudential to speak about the 

company’s underwriting practices and mortality assumptions. 

Janus, 564 U.S. at 142. Under Janus, then, the amended 

complaint plausibly pleads that Prudential, through Falzon, 

made the challenged statement. See id. at 147 n.11; see also 

Basic, 485 U.S. at 227 & n.4 (treating a paraphrased statement 

by a company’s president that was published in a newspaper as 

having been “made” by the company for purposes of Rule 

10b-5); Nursing Home Pension Fund, Loc. 144 v. Oracle 

Corp., 380 F.3d 1226, 1235 (9th Cir. 2004) (explaining, preJanus, that “when statements in analysts’ reports clearly 

originated from the defendants, and do not represent a third 

party’s projection, interpretation, or impression, the statements 

may be held to be actionable even if they are not exact 

quotations”).

In reaching a contrary conclusion, the District Court 

misapplied Janus. It examined Credit Suisse’s control over the 

analyst report and not Prudential’s ultimate authority over the 

statements within the report that were attributed to Falzon. But 

Janus distinguishes between the act of ‘making’ a statement 

and the act of republishing it, such that “publishing another’s 

statement does not make someone the ‘maker’ of the 

statement.” Stratos, 828 F.3d at 1033 (quoting Janus, 564 U.S. 

at 142–43); see also Janus, 564 U.S. at 147 n.11 (“[A]s long as 

a statement is made, it does not matter whether the statement 

was communicated directly or indirectly to the recipient.”); 

Basic, 485 U.S. at 227 & n.4. In this case, because the report 

attributed the statement to Falzon and the context of the 
27

statement indicates that he exercised control over its content 

and the decision to communicate it to Credit Suisse, the 

statement cannot, at least at the pleading stage, be considered 

to have been ‘made’ by Credit Suisse for purposes of Rule 

10b-5.

Nevertheless, the amended complaint does not plausibly 

allege the falsity of Falzon’s statement. The information used 

to justify its falsity – underwriting problems and negative

mortality in the Hartford Block – comes from confidential 

former employees. Even without accounting for any potential 

discounting of that information, see Avaya, 564 F.3d at 263, 

the statements support, at most, the conclusion that there were 

flaws in the underwriting practices and mortality assumptions 

for the Hartford Block that could not be remedied by raising 

premiums for the Hartford Block. But Falzon’s no-systemicissues statement concerned Individual Life as a whole – not 

just the Hartford Block. Thus, his statement cannot be 

interpreted as disavowing any issues related to underwriting or 

mortality assumptions in the Hartford Block. Rather, the 

statement communicated that there were no problems with 

underwriting or mortality assumptions that would jeopardize 

the performance of all of Individual Life. And without 

allegations about the relative size of the Hartford Block

compared to all of Individual Life, or about the magnitude of 

the problems in the Hartford Block relative to the full 

Individual Life portfolio, the amended complaint does not 

allow the inference that any problems with the Harford Block 

were systemic when Falzon made his statement. 

Accordingly, Falzon’s alleged statement reproduced in the 

Credit Suisse analyst report is not plausibly false or 

misleading. Also, because the Warren Retirement System did 

not identify any additional information that would change this 

conclusion, the District Court did not abuse its discretion in 

denying leave to amend the complaint in this respect.
28

D. Tanji’s Investor Day Comments

The most recent of the allegedly misleading statements 

were made on June 5, 2019, at Prudential’s Investor Day 

conference. The amended complaint identifies those 

statements and the circumstances surrounding them with the 

particularity required by Rule 9(b) and the PSLRA. During a 

presentation, Prudential’s CFO, Kenneth Y. Tanji, assured 

investors that Individual Life’s “recent [mortality] experience 

has been in between [the] range of what we’d expect[,] normal 

volatility, but net it has been below our experience.” App. at 

76–77 (Am. Compl. ¶ 54 (emphasis removed)). Then, in 

response to a follow-up question from an analyst, Tanji further 

described Individual Life’s mortality experience as “very 

quarter-to-quarter, both positive and negative,” or, at worst, 

only “slightly negative.” Id. (emphasis removed).

The amended complaint also specifies two reasons for 

those statements’ falsity. The first rationale relies entirely on 

information from a confidential former employee, referred to 

as ‘FE1.’ According to FE1, Prudential discussed in May 2019 

that its reserves would need to be significantly increased as a 

result of negative mortality experience in the Hartford Block:

[A]s early as May 2019, it was discussed in 

forecast meetings that Individual Life was 

performing poorly due to negative mortality 

experience in the legacy Hartford [B]lock and 

that [Prudential] would need to take a significant 

charge to Individual Life adjusted operating 

income. 

Id. at 79 (Am. Compl. ¶ 59). Tanji’s statement on June 5 that 

Prudential’s recent mortality experience had been within a 

normal range (or perhaps slightly negative) does not reconcile 

easily with these allegations that the company, the month 

before, discussed taking a significant reserve charge as a result 

of negative mortality experience. If credited, the information 
29

from FE1 would go a long way toward establishing the 

plausible falsity of Tanji’s statement. 

The second rationale for falsity is the combined effect of 

the temporal proximity of Tanji’s assurances, made eight 

weeks before Prudential’s corrective disclosures, and the 

magnitude of the corrective actions – a one-time $208 million 

reserve charge followed by a $25 million per-quarter reduction 

in earnings for the foreseeable future. Those allegations 

increase the likelihood that, contrary to Tanji’s statements, 

Individual Life’s recent mortality experience could not have 

been within a normal range, or at worst slightly negative, on 

Investor Day.4

 Consistent with that conclusion, the amended 

complaint alleges that a sensitivity analysis published by 

Prudential in a Form 8-K on December 6, 2018, indicated that 

a one-standard-deviation change in expected mortality would 

decrease Individual Life’s income by $55 million to $80 

million. From that reference point, it is a reasonable inference 

from a reserve charge of $208 million that the company’s 

mortality experience was not in the normal range, or at worst 

slightly negative, eight weeks before the charge. 

These allegations, if credited, along with the reasonable 

inferences that may be drawn from them, plausibly plead that 

the mortality experience for Individual Life was not within a 

normal range or just slightly negative as of June 5. Indeed, 

analysts were surprised by Prudential’s disclosure of the $208 

million reserve charge so close in time to the company’s 

4 Tanji’s Investor Day comments related to mortality 

experience, and Prudential’s corrective disclosures attributed 

the reserve charge to updated mortality assumptions. Those 

concepts are not the same, and unexpected mortality 

experience does not always compel updated mortality 

assumptions. But here, it is a reasonable inference, in light of

the magnitude of the reserve charge and the information from 

FE1, that Prudential’s updated mortality assumptions resulted

from negative mortality experience. 
30

Investor Day conference. See id. at 81 (Am. Compl. ¶ 61 

(citing a UBS report questioning why Prudential failed to 

“reset the bar” during Investor Day (emphasis removed))); id.

at 82 (Am. Compl. ¶ 62 (citing a Wells Fargo report predicting 

investor surprise because the announcement was “so close” in 

time to the Investor Day conference)). Thus, FE1’s account of 

Prudential’s internal discussions, combined with the 

magnitude of the reserve charge and its close temporal 

proximity to Investor Day, suffice to plead that Tanji’s 

statements regarding the company’s recent mortality 

experience were plausibly false or misleading when made.

5

To avoid that outcome, Prudential attacks both alleged 

rationales. It contends that the confidential-source information 

from FE1 is unreliable and should be steeply discounted. It 

also disputes the inference of falsity from the combination of 

the temporal proximity and the magnitude of the reserve 

adjustment. Neither of those contentions has merit, so we will 

vacate and remand the dismissal of the claims, including the 

companion claims under § 20(a), predicated on Tanji’s 

Investor Day remarks. See Avaya, 564 F.3d at 252, 280 (noting 

that “liability under Section 20(a) is derivative of an underlying 

violation of Section 10(b)”).

5 Because, when taken together, the information from FE1 and 

the circumstances of the reserve charge demonstrate the 

plausible falsity of Tanji’s statements, it is not necessary to 

assess whether either allegation would, on its own, cross the 

plausibility threshold. By contrast, the allegedly misleading

statements made earlier in the class period lack the same close 

temporal connection to the reserve charge. That attenuation, 

along with the lack of “mutually reinforcing” allegations and 

the other shortcomings identified above, makes unreasonable 

any inference that those prior statements were false. Avaya, 

564 F.3d at 266.
31

1. The Information Supplied by the 

Confidential Former Employee, 

‘FE1,’ Should Not Be Discounted.

Prudential argues that the information provided by FE1 

should be discounted to the point of insignificance. Under this 

Circuit’s PSLRA jurisprudence, allegations based on 

information from a confidential witness must be “steeply 

discounted” if the source is not credible or if the information is 

unreliable. Avaya, 564 F.3d at 262–63. Several factors guide 

that determination: the dependability of a confidential 

witness’s basis of knowledge; the level of detail provided by 

the witness; the degree to which other testimony or evidence 

corroborates the witness’s account; and the internal 

consistency of the information provided. See Chubb, 394 F.3d 

at 147; Rahman, 736 F.3d at 244. Under those factors, the 

information from FE1 related to Prudential’s discussions in 

May 2019 about taking a significant reserve charge cannot be 

discounted at the pleading stage.

As to the dependability of FE1’s basis of knowledge, the 

amended complaint provides “sufficient particularity to 

support the probability that a person in the position occupied 

by the source would possess the information alleged.” 

Rahman, 736 F.3d at 244 (quoting Novak, 216 F.3d at 314). 

Such a showing – that a confidential source, by virtue of his or 

her position, would have access to the information alleged –

can be made through a description of the duration of the 

confidential witness’s employment along with explanations of

how and when the confidential witness learned the 

information. See Avaya, 564 F.3d at 263; Chubb, 394 F.3d at 

148 (requiring “allegations regarding how or why [the 

confidential sources] would have access to the information 

they purport to possess”). The amended complaint describes 

FE1’s basis of knowledge in the required degree of detail. FE1 

was an Associate Manager in Prudential’s Planning and 

Analysis group between November 2016 and February 2020. 

In that position, FE1 regularly attended Individual Life forecast 

meetings with the actuarial, capital, and financial teams. And, 
32

as early as May 2019, FE1 learned that Prudential was 

discussing, at those forecast meetings, taking a significant 

reserve charge due to the Hartford Block’s negative mortality 

experience. 

The amended complaint also provides an appropriate 

degree of detail about the information provided by FE1. FE1 

explained that, internally, Prudential understood that 

Individual Life as a whole was “performing poorly” and that 

the company attributed that poor performance to “negative 

mortality experience in the legacy Hartford [B]lock.” App. at 

79 (Am. Compl. ¶ 59). Also according to FE1, those 

developments caused Prudential to discuss as early as May 

2019 that it “would need to take a significant charge to 

Individual Life adjusted operating income.” Id. This 

information contains enough detail to call into question the 

veracity of Tanji’s Investor Day remarks that Prudential’s 

mortality experience was within a normal range, or at worst 

only slightly negative. Cf. Rahman, 736 F.3d at 245 

(discounting information from a confidential witness that 

consisted of “little more than generalized allegations with few 

specifics”). 

In addition, other allegations in the amended complaint 

corroborate the information from FE1. The explanation 

reported by FE1 for Prudential’s internal discussions aligns 

with the company’s own justification for the $208 million 

reserve charge – updated mortality assumptions related to 

Individual Life’s longer-dated vintages. See Avaya, 564 F.3d 

at 264; cf. generally Illinois v. Gates, 462 U.S. 213, 244–45 

(1983) (noting “that corroboration through other sources of 

information reduce[s] the chances of a reckless or 

prevaricating tale” (quoting Jones v. United States, 362 U.S. 

257, 271 (1960))). Similarly, FE1’s report that the relevant 

discussions began as early as May 2019 is consistent with the 

timing of Prudential’s annual, actuarial assumptions review, 

which occurs during the second quarter of each fiscal year. 

And although they did not attend the forecast meetings, two 
33

other confidential witnesses with dependable bases for their 

more limited knowledge6 corroborate FE1’s report of negative

mortality experience in the Hartford Block. See Avaya, 564 F.3d at 266 (examining the dependability of a confidential 

witness’s basis of knowledge before relying on information 

from the witness for corroboration at the pleading stage). 

Consistent with FE1’s information, those witnesses reported 

that the Hartford Block was not adequately priced to cover its 

negative mortality experience and that its actuarial and data 

administration systems were subpar.

For similar reasons, the information from FE1 fits within a

coherent narrative. FE1’s report that the Hartford Block had 

problems with underwriting and with consistently negative 

mortality does not undermine the plausibility of other 

allegations in the amended complaint. To the contrary, FE1’s 

information reconciles with the possibility that Prudential 

initially viewed the underwriting and negative mortality issues

as localized to the Hartford Block, but that by the time of the 

company’s second-quarter assumptions review in May 2019,

the problems with the Hartford Block began to affect

Individual Life as a whole, prompting Prudential to take the 

$208 million reserve charge.

In sum, the factors used to evaluate the overall reliability of 

information from confidential sources do not reveal a basis to 

steeply discount the information from FE1. Consequently, the 

6 As alleged, one of the confidential former employees, 

referred to as ‘FE2,’ worked at Prudential from April 2001 to 

July 2019. During that time, FE2 worked as a manager in the 

company’s Actuarial Project Management Office with 

responsibility for assessing model risks. Another confidential 

former employee, referred to as ‘FE3,’ worked at Prudential 

from 2011 to June 2018. During that time, FE3 served as an 

associate manager in Individual Life Insurance Financial 

Planning and Analysis and was responsible for financial 

forecasting.
34

allegations premised on the information from FE1 must be 

taken as true at the pleading stage. See id. at 263.

2. Inferences About the Falsity of Tanji’s 

Investor Day Statements Are Not 

Impermissible Fraud by Hindsight.

Prudential separately argues that reliance on the $208 

million reserve charge eight weeks after Tanji’s statements is 

an impermissible attempt to plead fraud by hindsight, and 

therefore those allegations should not receive any weight in the 

plausibility analysis. The fraud-by-hindsight prohibition has 

its greatest potency in the context of otherwise deficient 

allegations of scienter,

7 but for purposes of allegations of 

falsity, it operates as a corollary of the rule that “[t]o be 

actionable, a statement or omission must have been misleading 

at the time it was made.” In re NAHC, Inc. Sec. Litig., 306 F.3d 

1314, 1330 (3d Cir. 2002); see also Williams, 869 F.3d at 244 

(noting that allegations of falsity “must be sufficient to show 

that the challenged statements were ‘actionably unsound when 

made’” (quoting In re Burlington Coat Factory, 114 F.3d at 

1430)). Thus, while the PSLRA forbids reliance on 

“speculative fraud by hindsight” allegations, In re Rockefeller, 

311 F.3d at 225 (emphasis added), later developments may 

allow a reasonable inference that prior statements were untrue 

or misleading when made. See In re Merck, 432 F.3d at 272

(“[A]ny information that sheds light on whether class period 

statements were false or materially misleading is relevant.” 

(quoting In re Scholastic Corp. Sec. Litig., 252 F.3d 63, 72 (2d 

7 See 15 U.S.C. § 78u-4(b)(2)(A) (requiring particularized 

allegations “giving rise to a strong inference that the defendant 

acted with the required state of mind” (emphasis added)); see 

also Tellabs, 551 U.S. at 320 (“The ‘strong inference’ [of 

scienter] formulation was appropriate, the Second Circuit said, 

to ward off allegations of ‘fraud by hindsight.’” (quoting 

Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1129 (2d Cir. 

1994))).
35

Cir. 2001))); Plotkin v. IP Axess Inc., 407 F.3d 690, 698 (5th 

Cir. 2005) (recognizing that “allegations of later-emerging 

facts can, in some circumstances, provide warrant for 

inferences about an earlier situation”). And an inference of 

falsity is easier to justify for statements that are followed 

shortly by corrective disclosures of significant dimension. See

Neiman v. Bulmahn, 854 F.3d 741, 751 (5th Cir. 2017) (“[T]he 

fact that a business files for bankruptcy on ‘Day Two,’ may, 

under the right surrounding circumstances, provide grounds for 

inferring that the business was performing poorly on ‘Day 

One.’” (quoting Plotkin, 407 F.3d at 698)); see also Emps.’ Ret. Sys. of Gov’t of the V.I. v. Blanford, 794 F.3d 297, 307 (2d 

Cir. 2015) (reasoning that “a significant gap in fourth quarter 

sales tends to support [a] claim that inventory was misleadingly 

characterized throughout the Class Period”); Novak, 216 F.3d 

at 312–13 (inferring from a company’s “significant write-off 

of inventory directly following the Class Period . . . that 

inventory was seriously overvalued at the time the purportedly 

misleading statements were made”).

This case illustrates the application of those principles. 

Prudential’s corrective disclosures were momentous (a $208 

million charge plus a $25 million quarterly impact on earnings 

for the foreseeable future) and close in time (eight weeks later) 

to Tanji’s statements. Thus, at least at the pleading stage, when 

Prudential has not yet had an opportunity to present its own 

evidence, the conclusion that Tanji’s statements were untrue is 

not impermissible fraud by hindsight, but instead a reasonable 

inference. See Plotkin, 407 F.3d at 697–98 (finding that events 

occurring months after the challenged statements were “so 

temporally connected that they shed light on the financial 

condition of the companies at the time” the statements were 

made).

IV. CONCLUSION

For these reasons, the Warren Retirement System plausibly 

pleaded falsity only with respect to CFO Tanji’s statements on 

June 5, 2019, regarding Prudential’s mortality experience. 
36

Accordingly, we will affirm the District Court’s judgment 

except for a vacatur with respect to the claims premised on 

those statements, recognizing that this “disposition entails a 

shorter class period” that can begin no earlier than the date of 

Tanji’s statements. Avaya, 564 F.3d at 280.