Court Opinion

ID: 8413390
Source: CourtListenerOpinion
Date Created: 2022-11-02 20:19:47.178744+00
Date Added: 2024-06-11T16:48:03.120157
License: Public Domain

LEVAL, Circuit Judge,
concurring in part and dissenting in part:
While I am in full agreement with most of the majority’s well reasoned opinion, I respectfully believe that RBS’s alleged statements relating to the April 2008 Rights Issue adequately stated a claim for securities fraud. According to the complaint (whose allegations we must accept as true for these purposes), the Financial Services Authority (which sets the standards financial services firms must meet in the United Kingdom),1 advised RBS on April 9, 2008, that it was “required ... to raise as much capital as possible.” About two weeks later, on April 22, 2008, RBS made public statements declaring, “[W]e were not asked to raise capital by anyone,” and the FSA “didn’t request us to [raise capital].” These statements were false, and in my view materially so.
The majority argues that RBS’s statements were not false because “RBS had already started preparations [for] the Rights Issue on April 4, 2008 — five days before the CEO of the FSA had his conversation with RBS.” Maj. Op. at 393. I believe this misses the point. The fact that RBS had decided to raise capital before being told by the FSA that it had to do so does not change the fact that it was required by the FSA to raise capital. Denial of that fact was false.
The majority further argues that even if those denials were false, they were not materially false. RBS’s top officers, while denying that RBS had been required to raise capital, acknowledged that the bank had been “encouraged” by the FSA to raise capital. In light of the openly acknowledged losses RBS had sustained, requiring a write-off of £5.9 billion, the majority posits that a reasonable investor would see no material difference between the acknowledged fact that RBS had been “encouraged” by the FSA to raise capital and a further statement that it had been “required” by the FSA to do so. In my view the difference is substantial. The fact that such a regulatory agency has required a bank to raise capital implies that the regulatory agency finds the bank’s capital reserves to be dangerously low. If the regulatory agency merely “encourages” the bank to raise capital, but does not require it, this implies that while the agency believes it would be prudent for the bank to raise capital, the bank’s present *395level of capital is not dangerously low. That RBS was required by the FSA to raise capital is a fact a reasonable investor would want to know.
According, to the majority opinion, a federal securities fraud claim may not properly be dismissed under Rule 12(b)(6) because false statements are not materially false unless the misstatements are “so obviously unimportant to a reasonable investor that reasonable minds could not differ on the question of their importance.” Maj. Op. at 390 (quoting ECA & Local 13b IBEW Joint Pension Trust of Chi. v. JP Morgan Chase Co., 553 F.3d 187, 197 (2d Cir.2009)). In my view, the complaint alleging RBS’s false denials that the FSA required RBS to raise capital easily passes that standard.

. -The Financial Services Authority (the "FSA”) was, until 2013, the regulatory body in the United Kingdom responsible for "regulating] most financial services markets, exchanges and firms” and "set[ting] the standards that [financial services firms] must meet,” and it had the power to "take action against firms if they fail[ed] to meet the required standards.” What we do: who we regulate, Financial Services Authority (last' updated June 14, 2014), http://www.fsa.gov.uk/ about/what/who.