How To Avoid Material Misstatements As A Corporation Subject To Securities Laws
One of the central purposes of securities law is to provide a level playing field for businesses, investors, and other parties to corporate activities. Particularly, the law expects parties to avoid making misstatements that could materially disadvantage investors or advantage key parties.
If you're part of a corporation that's subject to any securities laws, how do you avoid such misstatements? A corporate lawyer will usually encourage you to do these three things.
Stick to Material Facts
Business news can be dreadfully boring to listen to. That is the case because a properly lawyered corporation will stick to making statements of material facts in the plainest manner possible. Stating earnings and losses, for example, might not be the most exciting thing in the world. However, there is a low risk that such numbers will constitute materially actionable misstatements as long as they're accurately presented in good faith and on a schedule.
Develop a Corporate Culture Grounded in Securities Law
Everyone within your corporation should treat compliance with securities laws as a core value. They should know who counts as an insider and what counts as inside information. Likewise, they should follow the release schedule for material statements religiously. Everyone should know when embargoes are in effect so they can avoid statements that could move the company's investment value.
Bear in mind that this culture must extend to all statements of facts regarding anything that could move the needle. Even if team members are over the moon with excitement about a new project, they can't make statements before certain embargo periods end. Make sure everyone knows the rules so they can avoid any missteps.
Ask for Legal Review
There is no such thing as asking a securities law attorney to review too many statements. Even if you're just pushing out a press release, there is a risk it might contain material facts that could move the market. The simplest solution is to put every publicly available statement in front of a corporate lawyer so they can review it. No statement goes outside the company until counsel has cleared it for release.
Be aware you may need to be available to answer questions for the corporate lawyer doing the review. They might need to discuss issues ranging from accounting to research so they have context regarding what is or isn't material. Make sure someone is available to field the lawyer's questions so you can keep the release process as efficient as possible. For more information, contact a securities law attorney near you.