OPINION
Thе plaintiff, Ashland Inc. (“Ashland”), appeals the district court’s dismissal of its amended complaint against Oppenheimer & Co., Inc. (“Oppenheimer”) in this securities-fraud action. We affirm the district court’s decision.
I. Background
Ashland is a diversified global chemical company headquartered in Kentucky. Oppenheimer is a securities broker-dealer headquartered in New York. This suit arises from Ashland’s purchase of Oppenheimer-brokered auction rate securities (“ARS”) in 2007 and 2008.
ARS are long-term bonds whose interest rates periodically resеt through recurring auctions — commonly held every seven, fourteen, twenty-eight, or thirty-five days. ARS typically offer higher returns than treasuries or other money market instruments, but with little additional credit risk. Moreover, investors can liquidate their positions at each auction — assuming demand exceeds siipply. If, however, sellers outnumber buyers at a particular auction, the auction “fails,” and no ARS owner may sell his position. Though they have no obligation to do so, ARS underwriters (generally investment banks) may partake in the auctions, placing proprietary bids, to help ensure that the auctions do not fail. As an additional safeguard, if an ARS auction fails, the securities will offer a “penalty” interest rate meant to compensate owners for temporary illiquidity and entice new buyers to emerge. The penalty rate offered varies from security to security, but is generally specified in each security’s offering document.
Following a capital divestiture in 2005, Ashland sought to invest approximately $1.3 billion while it searched for acquisition targets. During May 2007, Joseph Broce, Ashland’s Assistant Treasurer, met with Sherri Castner, Oppenheimer’s Executive Director of Investments, to discuss the matter. Castner advocated that Ashland buy ARS. Touting ARS’ strong credit ratings, Castner represented them as “safe and liquid” investments, “comparable to money market instruments.” “[I]nstances of ‘disequilibrium’ in the ARS market were very rare,” she said, because underwriters “had never allowed an auction to fail and would continue to act to prevent such an occurrence.” Ashland heeded Castner’s advice and purchased Oppenheimer-brokered, municipal-bond-backed ARS.
In mid-2007, Broce became worried about the subprime-mortgage crisis’s effect on the securities and asked Castner what other investments Ashland might consider. Castner recommended that he look at student-loan-backed ARS (“SLARS”), which she claimed offered the same benefits as municipal ARS, but “were not connected to the market for subprime mortgages.” Ashland thus started purchasing SLARS in lieu of tax-exempt ARS.
*466 In January 2008, Ashland learned that Goldman Sachs, an underwriter for several SLARS deals, allowed one of its auctions to fail. Broce, concerned about the event, contacted Castner; she characterized the failure as an “aberration” and told Broce that SLARS remained “safe, liquid[,] and suitable investments” with “strong investor demand.” But later that month, Lehman Brothers also let some of its ARS auctions fail. Shortly thereafter, Piper Jaffray followed suit. In the days surrounding these auctions, Oppenheimer continued marketing SLARS to Ashland, but “made absolutely no mention of the substantial systemic dangers in the ARS market,” leading Ashland to hold and expand its SLARS portfolio.
Ashland purchased its last SLARS in early February 2008. Four days later, Oppenheimer’s CEO called a meeting with company executives “to discuss the ARS market.” The CEO later testified that, “at the end of this meeting, Oppenheimer had concluded that there were particular problems concerning SLARS.” The market imploded the next day. Following this event, Broce told Castner to sell Ashland’s SLARS, but neither Oppenheimer nor any underwriters would place proprietary bids, leaving Ashland with $194 million in illiquid SLARS. Ashland, unable to sell most of these holdings, discounted them by millions of dollаrs and lost similar amounts in the few sales it did execute. Moreover, when Ashland finally encountered an acquisition opportunity — the entire reason it sought a liquid investment — it had to borrow funds and incurred millions of dollars in financing costs.
Ashland now alleges that, contrary to Oppenheimer’s CEO’s statements, Oppenheimer actually knew about the ARS meltdown months in advance. As support for its allegation, Ashland points to several occurrences. First, “beginning no later than August 2007, [Oppenheimer’s CEO] received a hand[-]delivered memo each day documenting the status of failed ARS auctions.” Second, Oppenheimer’s CEO and an Oppenheimer Vice President, “aware of the spate of auction failures in the ARS market,” sold some of their ARS holdings' — $2.65 million and $100,000, respectively — between December 2007 and early February 2008. Then, in January 2008, another Oppenheimer Senior Vice President emailed company executives, cautioning that if a lead underwriter were “to quickly exit the [ARS] business entirely,” the firm would have to find a replacement to process orders. If there were no replacements, however, Oppenheimer “[might] not be able to sell shares.” Finally, in November 2008, the Massachusetts Office of the Secretary of the Commonwealth filed an administrative complaint against Oppenheimer. In conversations with these officials, an Oppenheimer Vice President retrospectively commented that “downgrades in monoline insurers were causing inereasing[ly] noticeable stress on the ARS market by late 2007.”
In addition to this central claim, Ash-land’s complaint lists severаl other facts about the securities that Oppenheimer allegedly withheld. For example, Oppenheimer never provided offering documents for ARS issuances until after Ashland purchased the instruments. 1 Nor did Oppenheimer disclose the ARS’ true liquidity *467 risks, including their lack of organic demand and the degree to which underwriters supported the auction market. Similarly, Oppenheimer failed to warn Ashland that underwriters “were not committed to ensuring liquidity” for ARS and SLARS, and would only place bids when it served their “own commercial best interests.” Moreover, in promoting the ARS’ AAA credit ratings, Oppenheimer never mentioned that they “were ... achieved only because” of the securities’ low penalty rates, which made the bonds harder for buyers to resell. 2 Finally, Oppenheimer never disclosed its sales commission structures, including that employees lost commissions if clients resold their ARS before a “minimum holding period” had passed.
In April 2009, Ashland sued Oppenheimer in the Eastern District of Kentucky, asserting five claims: (1) violation of the Securities Exchange Act of 1934, (2) violation of Kentucky Blue Sky Laws, (3) common-law fraud, (4) promissory estoppel, and (5) negligent misrеpresentation. Oppenheimer moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). The district court heard oral argument on the motion before dismissing the case with prejudice in early 2010. In its memorandum opinion, the court explained that Ashland’s securities-fraud claims did not allege “facts or scienter with the requisite particularity,”
Ashland Inc. v. Oppenheimer & Co.,
II. Analysis
A. Applicable Legal Standards
We review de novo a district court’s dismissal of a complaint pursuant to Rule 12(b)(6).
Bowman v. United States,
Under Federal Rule оf Civil Procedure 8(a)’s pleading standard, a plaintiff must provide “a short and plain statement of the claim showing that [he] is entitled to relief.” Yet the complaint must include more than “labels and conclusions” or “a formulaic recitation of the elements of a cause of action,”
Bell Atl. Corp. v. Twombly,
B. Federal Securities-Law Claim
Ashland first alleges that Oppenheimer violated Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5. “To state a securities fraud claim under Section 10(b), a plaintiff must allege, in connection with the purchase or sale of securities, the misstatement or omission of a material fact, made with sсienter, upon which the plaintiff justifiably relied and which proximately caused the plaintiffs injury.”
Frank v. Dana Corp.,
,[4,5] Contrary to Ashland’s allegations, many of Oppenheimer’s purported misstatements and omissions are not actionable, either because they lacked materiality or because Oppenheimer had no duty to disclose them. For example, Ash-land asserts it did not know that Oppenheimer’s brokers received commissions only when clients bought and held ARS, a compensation structure that might place brokers’ and investors’ interests at odds. But “[t]here is nо duty [for a company] to disclose the incentives that [it] provides its own employees to encourage those employees to sell specific products.”
Hoffman v. UBS-AG,
Recognizing that many of the purported misrepresentations and omissions that Ashland denounces lack Rule 10b-5 actionability, we look past these allegations and focus instead on its central claim: Oppenheimer peddled ARS to Ashland as liquid, short-term investments, all while withholding a crucial factor abоut the market — that its continued health depended upon the intervention of underwriters,
*469
many of whom were abandoning ARS auctions. We assume that disclosure of this fact would “significantly alter[] the total mix” of available information about ARS,
see In re Sofamor Danek Grp., Inc.,
In the securities-fraud context, the Private Securities Litigation Reform Act of 1995 (“PSLRA”) imposes “[exacting pleading requirements for pleading scienter,”
Frank,
In
Helwig v. Vencor, Inc.,
we laid out a non-exhaustive list of factors we deemed probative of scienter in securities-fraud cases.
In accordance with this new precedent, we forgo the itemized claim analysis conducted by the district court and conclude that Ashland’s factual allegations, when considered together, do not give rise to a strong inference that Oppenheimer acted
*470
with scienter. Simply put, apart from conclusory allegations, Ashland fails to provide
any
facts explaining why or how Oppenheimer possessed advance, non-public knowledge that underwriters would jointly exit the ARS market and cause its collapse in February 2008 — thereby exposing Oppenheimer’s “deliberate intent to manipulate, deceive, or defraud.”
See Ley,
While the existence of scienter is
possible
in this case, the more compelling explanation is that the near-spontaneous collapse of the ARS market caught Oppenheimer and its employees off guard. And though Oppenheimer may have “engaged in bad (in hindsight) business judgments in connection with ARS,”
see In re Citigroup Auction Rate Sec. Litig.,
Our survey of the ARS-related litigation landscape affirms our position. Since the ARS fallout in early 2008, dozens of plaintiffs have sued both investment banks and broker-dealers for purportedly covering up problems in the market. In the few fraudulent-misrepresentation cases surviving motions to dismiss, the plaintiffs sufficiently explained
why or how
the defendants knew about the ARS market’s impending illiquidity.
See, e.g., In re Merrill Lynch Auction Rate Sec. Litig.,
No. 09-MD-2030,
C. Kentucky Seeurities-Law Claim
Ashland next alleges that Oppenheimer violated Kentucky’s Blue Sky Laws, specifically Ky.Rev.Stat. Ann. §§ 292.320, 292.480, which mirror 17 C.F.R. § 240.10b-5 and 15 U.S.C. § 77i(a), respectively.
See Booth v. Verity, Inc.,
As the district court noted, Section 292.320 is “virtually identical” to its federal counterpart.
Ashland Inc. v. Oppenheimer & Co.,
D. Common-Law Fraud Claim
Complementing its securities-fraud claims, Ashland also alleges that Oppenheimer’s actions constituted fraud under Kentucky’s common law. To prevail on a claim of common-law fraud, a plaintiff must establish, by clear and convincing evidence, the following six elements: (1) that the declarant made a material misrepresentation to the plaintiff, (2) that this misrepresentation was false, (3) that the declarant knew it was false or made it recklessly, (4) that the declarant induced the plaintiff to act upon the misrepresentation, (5) that the plaintiff relied upon the misrepresentation, and (6) that thе misrepresentation caused injury to the plaintiff.
See, e.g., Clayton v. Heartland Res., Inc.,
We recognize, as Ashland emphasizes in its brief, that its common-law fraud claim need not meet the PSLRA’s heightened pleading requirements. It must nonetheless fulfill Federal Rule of Civil Procedure 9(b)’s particularity requirements,
see Frank,
E. Promissory-Estoppel Claim
As its fourth claim, Ashland asserts that we must force Oppenheimer to fulfill the promises it made in connection with Ashland’s ARS purchases. Under Kentucky law, “[a] promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.”
McCarthy v. Louisville Cartage Co.,
Ashland alleges that Oppenheimer promised (1) that the ARS were “safe and liquid,” (2) that Oppenheimer and the lead underwriters “would ensure the liquidity of’ these ARS, and (3) that Oppenheimer and the lead underwriters “had the intent and ability to never allow Ashland to be left holding illiquid” ARS. None of these “promises” justifies estoppel.
Despite Ashland’s lаbeling, Oppenheimer’s descriptions about ARS’ safety and liquidity do not qualify as promises, since these vague statements do not implicate any commitment on Oppenheimer’s part. See Restatement (Second) of Contracts § 2(1) (1981) (“A promise is a manifestation of intention to act or refrain from acting in a specified way....”). Dispelling this first claim leaves us with Oppenheimer’s promises to guarantee the ARS’ liquidity — promises we do not believe must be enforced in order to avoid injustice. Ashland admits to reading Oppenheimer’s оnline ARS Brochure; in that document, Oppenheimer explicitly warned that it “is not obligated to submit a bid to prevent an auction failure,” and “provides no assurance ... as to the outcome of any auction.” Thus, the promises upon which Ashland allegedly relied directly contradict the explicit terms of Oppenheimer’s ARS Brochure. Moreover, Oppenheimer repeated similar admonitions in each of the offering statements that accompanied its ARS sales. Ashland claims to have lacked these offering statements at the time of its purchases, but the ARS Brochure, which Ashland possessed, instructs investors to “read and understand the relevant offering documents” before purchasing ARS.
The Second Circuit, when confronting a similar scenario, held that “[a]n investor may not justifiably rely on a misrepresentation if, through minimal diligence, the investor should have discovered the truth.”
Brown v. E.F. Hutton Grp., Inc.,
F. NegligenNMisrepresentation Claim
Finally, Ashland alleges that Oppenheimer negligently misrepresented its ARS. Under Kentucky law, to plead negligent misrepresentation, Ashland must allege facts showing that (1) Oppenheimer, in the course of its business or in a transaction in which it had a pecuniary interest, failed to exercise reasonable care or competence, and thereby supplied false information for the guidance of Ashland’s business transactions; (2) Ashland justifiably relied on this information; and (3) Ashland suffered a pecuniary loss.
See Presnell Constr. Managers, Inc. v. EH Constr., LLC,
We need not belabor our analysis of Ashland’s final claim, which fails for much the same reason as its promissoryestoppel claim. Namely, Ashland does not allege facts shоwing that it justifiably relied on Oppenheimer’s ambiguous representations, particularly in light of the numerous warnings contained in Oppenheimer’s online ARS Brochure, as well as in the ARS’ offering documents to which Ashland was directed. And, as a secondary matter, Ashland failed to allege facts indicating that Oppenheimer supplied false information about ARS’ liquidity — i.e., facts demonstrating that the securities were actually illiquid between July 2007 and early February 2008, the period during which Ashland made its purchases.
See Ashland Inc. v. Oppenheimer & Co.,
III. Conclusion
For the foregoing reasons, we affirm the district court’s order dismissing Ashland’s complaint with prejudice.
Notes
. Note, however, that Ashland could (and indeed did) access Oppenheimer’s online ARS Brochure. The brochure clearly warns that ”[b]efore investing in any ARS, investors should read and understand the relevant offering documents, inсluding the information that they provide regarding all the risks and special considerations that may apply.” Ash-land does not allege that it ever requested the ARS’ offering documents prior to auction, or that Oppenheimer would have denied Ash-land’s requests, had it done so.
. Ashland emphasizes that Oppenheimer's online ARS Brochure does not specify these penalty rates, and that Oppenheimer did not directly disclose the rates to Ashland until Ashland explicitly requested them in February 2008. Again, though, the brochure explains wherе to obtain this information: "[Auction] [procedures contained in the relevant offering documents ... of specific ARS may vary from security to security. Accordingly, investors should read and understand the offering documents before investing in any ARS.... The method by which maximum and minimum rates are calculated typically is specified in the offering documents of the security. Not all maximum and minimum rates are calculated identically.”
. "Recklessness is defined as highly unreasonable conduct which is an extreme departure from the standards of ordinary care. While the danger need not be known, it must at least be so obvious that any reasonable man would have known of it.”
PR Diamonds, Inc. v. Chandler,