Renewed hope for passive investors in Standard Chartered securities litigation

On 25 March 2025, Green J issued a ruling in Persons Identified in Schedule 1 v Standard Chartered PLC [2025] EWHC 698 (Ch), marking a significant development in the legal landscape. The judgment reignites discussions surrounding the use of “price or market reliance” to satisfy the reliance criteria outlined in Schedule 10A of the Financial Services and Markets Act 2000 (“FSMA”), along with revisiting the parameters of claims for dishonest delay under Schedule 10A FSMA.

“Price or market reliance” involves the contention that in an efficient market, all publicly available information regarding a company is factored into the market price of its securities. This argument suggests that “passive,” “index-linked,” or “tracker” funds, which make investment decisions based on share prices, implicitly rely on a company’s disclosed information. This concept resonates with the “fraud on the market” presumption frequently observed in US securities litigation.

Paragraph 3 of Schedule 10A FSMA, the successor to section 90A FSMA, empowers investors to seek recourse against an issuer of securities for false or misleading statements or omissions in “published information,” such as quarterly or annual reports and trading updates. To pursue a claim successfully under this provision, the claimant must demonstrate that a person in a managerial role within the issuer either knew or acted recklessly regarding the information’s accuracy or knowingly concealed a material fact. Additionally, the claimant must prove that their reliance on the published information was reasonable from an objective standpoint.

Moreover, Paragraph 5 of Schedule 10A FSMA extends legal remedies to investors when issuers unduly delay the release of information covered by Schedule 10A due to dishonest conduct by a person in a managerial capacity. Importantly, claims for dishonest delay do not mandate claimants to establish reliance, prompting litigants to often include these claims as a precautionary measure to mitigate reliance-related challenges.

Section 90 FSMA offers redress for misleading statements or omissions in listing particulars or prospectuses without explicitly necessitating proof of reliance from claimants. This provision further broadens the avenues available to investors seeking legal recourse in cases of securities litigation.

The legal complexities surrounding the Standard Chartered case emerge from allegations of historic sanctions non-compliance by the bank. The Claimants have brought forth claims under various legal provisions, including section 90 FSMA concerning misleading statements in the bank’s prospectuses. Additionally, claims under Paragraph 3 of Schedule 10A FSMA highlight alleged false statements and improper omissions in Standard Chartered’s published information. Lastly, claims under Paragraph 5 of Schedule 10A FSMA allege dishonest delays in disclosing information.

In response, Standard Chartered sought to dismiss certain claims related to “price or market reliance” arguments, contending that such reliance did not align with Schedule 10A FSMA requirements. Furthermore, the bank challenged claims pertaining to dishonest delays on procedural grounds, contesting the adequacy of the claims’ legal basis, particularly concerning Paragraph 5 of Schedule 10A.

The judgment in Persons Identified in Schedule 1 v Standard Chartered PLC [2025] EWHC 698 (Ch) offers renewed hope for passive investors navigating the legal complexities of securities litigation. The ruling underscores the significance of robust legal frameworks in safeguarding investor rights and promoting transparency in financial markets.