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.
SEC Whistleblower Lawyer’s Tips to Qualify for an SEC Whistleblower Award
See our article 5 Tips for SEC Whistleblowers to Get SEC Whistleblower Awards.