MEMORANDUM & ORDER HDFC Bank Limited is a bank based in Mumbai. The bank is publicly held; its shares trade primarily in India, but it also has issued American Depositary Shares (“ADS”) that are listed on the New York Stock Exchange. In 2020, the Economic Times reported on allegations of improper lending practices and conflicts of interest in HDFC’s auto loans department. HDFC’s share price fell modestly on this news. The Economic Times later reported that some bank employees had “forced” customers to purchase GPS navigation devices by bundling them with car loans in order to meet sales targets. In some cases, according to the Economic Times, these customers were not aware that they had purchased the GPS devices until after the loan contracts had been executed. The lead plaintiff brings this putative class action,1 alleging that HDFC committed securities fraud by overstating the quality of its internal controls in public disclosures and failing to disclose the “forced bundling” scheme. Plaintiff also names as defendants two executives, Aditya Puri and Sashidhar Jagdishan — the company’s former managing director and CFO, respectively. Defendants now move to dismiss the suit under Federal Rule of Civil Procedure 12(b)(6). Because the complaint does not adequately allege the materiality of the misstatements and omissions at issue, the motion is granted. I. Background The facts described herein are taken from the amended complaint, as well as “statements or documents incorporated into the complaint by reference” and “legally required public disclosure documents filed with the SEC,” which are properly considered at the motion to dismiss stage. See ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007).2 The allegations are based on “information and belief” as to all matters outside of Plaintiff and Plaintiff’s own acts. Am. Compl. 1, ECF No. 27. HDFC files a Form 20-F with the SEC annually. The 20-Fs at issue were submitted each July from 2015 through 2019. Id.
1, 30, 39, 48, 56, 64. In those filings, HDFC and its executives made numerous statements that Plaintiff alleges were false or misleading, either for what they said or what they omitted. These disclosures stated, among other things, that the bank had effective internal controls and policies to detect fraud — including a “Code of Ethics,” a whistleblower policy, an internal audit department, and a “Fraud Monitoring Committee.” See id.
