<<There's a form (the number escapes me right now) a company has to file with the SEC when significant events occur>>
Scott:
Public companies are subject to various reporting requirements, but most are retrospective "periodic" reports on results of operations. These are the reports with which we are familiar and which form the basis of most stock reporting guides. The '34 Act generally does not impose obligations relating to the forecasting of future events. For a time it was thought that Rule 10(b)(5) required companies to "warn" of trouble ahead based on an omission = fraud on the market theory, but this theory was never favored by the courts. So, subject to the caveats below, the law currently is that a company has no duty to speak regarding its view of future results. If it does speak, however, the '34 Act requires that it speak fully, fairly and truthfully.
Many public companies nevertheless do warn of upcoming poor results. They do so not because of the '34 Act but because forewarnings have the effect of mitigating the downward price movement and also the effect of chilling the enthusiasm of the plaintiff lawyers for bringing suit. Ever notice how infrequently a company pre-announces better than expected results? That's because if something goes wrong and the results come in lower, the plaintiff lawyers will be on 'em like ants on a picnic.
The foregoing is subject to the following caveats: (1) that the foregoing is not intended as legal advice on which you or others may rely; and (2) that I left the securities law area several years ago to do commercial real estate deals, so the current law might be a little different from my recollection. As to the fundamentals, however, I am pretty confident that nothing has changed.
Regards,
John |
