The U.S. Supreme Court unanimously found Thursday in Slack Technologies v. Pirani that federal securities law requires plaintiffs to prove their shares are directly traceable to misleading information in a registration statement in order to sue.

Fiyyaz Pirani, an individual investor, sued Slack Technologies, an instant messaging app, after the stock price dropped. Pirani bought a total of 250,000 shares of Slack, 30,000 of which were purchased on the day Slack’s shares were released to the public. Pirani sued after the price drop, claiming that Slack violated §§11 and 12 of the Securities Act of 1933. He claimed that Slack had filed a “materially misleading registration statement” and should therefore be held accountable for the loss. The Supreme Court only heard claims regarding §11 in this matter.

§11 states that individuals can sue if shares were purchased as a result of misleading or untrue registration statements.

11(a) of the act states

In case any part of the registration statement, when such part became effective, 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, any person acquiring such security (unless it is proved that at the time of such acquisition he knew of such untruth or omission) may, either at law or in equity, in any court of competent jurisdiction, sue [certain enumerated parties].

The question for the Court in this matter was whether §11 can be interpreted broadly to include any shares purchased from the company or if it must be interpreted narrowly to include only shares directly traceable to the allegedly misleading registration statement. The Court ruled unanimously in favor of a narrower definition.

The Court did not determine whether Slack’s statement was misleading, or if any of Pirani’s shares are traceable to the statement, but remanded the decision to the lower courts to rule on given the narrower definition.