In a recent decision, the U.S. Court of Appeals for the Second Circuit (Court) held that failure to disclose the existence of an SEC investigation could constitute a material omission for purposes of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b‑5(b) thereunder. Class action plaintiffs had alleged that a company and two of its officers had disclosed in public filings that the company had identified deficiencies in its accounting controls but fraudulently failed to disclose that it was also under investigation by the SEC in connection with those deficiencies. Plaintiffs also alleged that defendants failed to disclose payments to the authors of favorable articles about the company. The U.S. District Court for the Western District of New York dismissed the entire complaint, but on appeal, the Court vacated that court’s decision with respect to the claims premised on failure to disclose the SEC investigation. Although the ruling pertains to disclosures by a public company, the principles underlying the decision are equally applicable to private fund managers. This article analyzes the relevant allegations from the class action complaint, the action’s procedural history and the Court’s reasoning. See “How Do Regulatory Investigations Affect the Hedge Fund Audit Process, Investor Redemptions, Reporting of Loss Contingencies and Management Representation Letters?” (Jan. 22, 2015); and “Is a Hedge Fund Manager Required to Disclose the Existence or Substance of SEC Examination Deficiency Letters to Investors or Potential Investors?” (Jun. 1, 2011).