Image of Does concealment of potential liability violate federal securities laws?

Does concealment of potential liability violate federal securities laws?


Regulation S-K Item 103 requires the corporation to briefly describe material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the corporation is a party and to “include similar information as to any such proceedings known to be contemplated by governmental authorities.” (Emphasis supplied).  And registered corporations are required to disclose unlawful – but uncharged – conduct when such violations specifically threaten investors’ ability to receive a return.

Materiality cannot be determined exclusively based on quantitative metrics such as the percent of earnings or revenue affected by the misstatement. SEC Staff Accounting Bulletin No. 99, 64 Fed. Reg. 45,150, 45,151 (Aug. 19, 1999) (codified at 17 C.F.R. pt. 211). Rather, a corporation must consider qualitative factors that “may cause misstatements of quantitatively small amounts to be material.” Id. The Bulletin specifically contemplates “whether the misstatement involves concealment of an unlawful transaction.” Id.

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Jason Zuckerman, Principal of Zuckerman Law, litigates whistleblower retaliation, qui tam, wrongful discharge, and other employment-related claims. He is rated 10 out of 10 by Avvo, was recognized by Washingtonian magazine as a “Top Whistleblower Lawyer” in 2015 and selected by his peers to be included in The Best Lawyers in America® and in SuperLawyers.