Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

Business Crimes BulletinFeaturesRegulationSecurities LitigationWhite Collar Crime

Disclosure of Investigations: Whether and When for Public Companies

By Jacqueline C. Wolff and Karin M. Bell
November 01, 2021

You are the general counsel of a mid-cap company trading on the New York Stock Exchange. Because of your firm's international work, you have instituted a global anti-corruption compliance program, complete with a whistleblower hotline. Sunday night, an anonymous call comes in on the hotline. The manager of your Nigerian subsidiary has been inviting the tax minister on weekly yacht cruises in exchange for better tax treatment. Being the good corporate citizen you are, you quickly commence an internal investigation. On Monday afternoon, the Securities and Exchange Commission sends a document request and tells you it has opened an informal investigation.

Do you have to disclose to your shareholders the whistleblower's allegation, your internal investigation and/or the SEC's document request? What if there were a Formal Order of Investigation? Or a Wells Notice? What if the Nigerian business constitutes less than 1% of your company's revenue? Or there are price-fixing allegations? Or the minister appears on the Specially Designated Nationals list?

|

The Securities Laws and Regulations

Section 13(a) of the Exchange Act (15 U.S.C. 78m(a)) and the accompanying rules obligate issuers to file periodic reports with information that is accurate and not misleading. Failure to do so can result in the SEC charging a company with making material false statements or material omissions in violation of sections 17(a)(2) and (a)(3) of the Securities Act (15 U.S.C. 77q(a)(2) and (a)(3)) or Rule 10b-5 (17 C.F.R. §240.10b-5), the latter requiring a showing of scienter, the former requiring nothing more than mere negligence. An omission is material where there is "a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the total mix of information made available." In re Lions Gate Entertainment Corp. Sec. Litig., 165 F. Supp. 3d 1, 10-11 (S.D.N.Y. 2016); In re UBS AG Sec. Litig., No. 07-cv-11225, 2012 WL 4471265, at 31 (materiality analysis requires a showing of actual materiality, not the mere possibility that an investigation may be material).

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
How Secure Is the AI System Your Law Firm Is Using? Image

In a profession where confidentiality is paramount, failing to address AI security concerns could have disastrous consequences. It is vital that law firms and those in related industries ask the right questions about AI security to protect their clients and their reputation.

COVID-19 and Lease Negotiations: Early Termination Provisions Image

During the COVID-19 pandemic, some tenants were able to negotiate termination agreements with their landlords. But even though a landlord may agree to terminate a lease to regain control of a defaulting tenant's space without costly and lengthy litigation, typically a defaulting tenant that otherwise has no contractual right to terminate its lease will be in a much weaker bargaining position with respect to the conditions for termination.

Pleading Importation: ITC Decisions Highlight Need for Adequate Evidentiary Support Image

The International Trade Commission is empowered to block the importation into the United States of products that infringe U.S. intellectual property rights, In the past, the ITC generally instituted investigations without questioning the importation allegations in the complaint, however in several recent cases, the ITC declined to institute an investigation as to certain proposed respondents due to inadequate pleading of importation.

The Power of Your Inner Circle: Turning Friends and Social Contacts Into Business Allies Image

Practical strategies to explore doing business with friends and social contacts in a way that respects relationships and maximizes opportunities.

Authentic Communications Today Increase Success for Value-Driven Clients Image

As the relationship between in-house and outside counsel continues to evolve, lawyers must continue to foster a client-first mindset, offer business-focused solutions, and embrace technology that helps deliver work faster and more efficiently.