Re: Forward Looking Statements (revisited)
After rereading the previously cited text [1], it seems clear that Congress enacted the Reform Act to curb costly and abusive litigation [2]. As it was an all too common practice to sue companies if their stock took a sudden drop with the excuse that certain forward-looking statements were too optimistic, a "Safe Harbor" statement was composed [3]. Safe Harbor requires judges to toss out lawsuits where such a statement is invoked, unless certain specific conditions are met [4]. However, Safe Harbor applies primarily to reporting companies and specifically excludes penny stock companies.
Does this mean non-reporting OTC companies shouldn't bother to include Safe Harbor statements whenever they make forward looking statements? NO! While a Safe Harbor statement will not automatically (i.e. by law) protect such companies from costly and perhaps meritless litigation, any disclaimer is obviously better than no disclaimer. In other words, it certainly can't hurt.
Side note: I see on RB that Ray-Jay is trying to argue that if an entity is "excluded" from the protection of the Safe Harbor provision it means they are "not allowed" to invoke it. This notion is obviously downright silly.
- Jeff
[1] sec.gov
[2] In an effort to protect "investors, issuers, and all who are associated with our capital markets from abusive securities litigation," and to "discourage frivolous litigation," the Reform Act made many changes to the system of private litigation, and particularly class action litigation, under the federal securities laws.
[3] Specifically, the safe harbor provides protection from liability in any private action under the federal securities laws as a result of any forward-looking statement, whether written or oral, if --...
[4] The Reform Act also requires a plaintiff in a private action under the Exchange Act to specify each statement alleged to have been misleading and the reasons why the statement is misleading. If an allegation is made on information and belief, the plaintiff must state with particularity all facts on which the belief is formed. The court is required to dismiss a complaint that does not meet these statutory pleading requirements.
[5] The safe harbor is limited with respect to the type of person making the statement, applying primarily to statements by or about reporting companies. There are also a number of important exclusions from the protection of the safe harbor. |
