{"id":642,"date":"2010-02-03T23:24:34","date_gmt":"2010-02-03T23:24:34","guid":{"rendered":"https:\/\/www.stockbrokerfraudblog.com\/2010\/02\/sec_warns_that_disclosure_of_a"},"modified":"2021-09-20T15:40:16","modified_gmt":"2021-09-20T20:40:16","slug":"sec-warns-that-disclosure-of-a","status":"publish","type":"post","link":"https:\/\/www.investorlawyers.com\/blog\/sec-warns-that-disclosure-of-a\/","title":{"rendered":"SEC Warns that Disclosure of a \u201cPossible Risk\u201d is Misleading When the Event has Already Occurred"},"content":{"rendered":"<p>\t\t\t\tAccording to the US Securities and Exchange Commission, the  Private Securities Litigation Reform Act&#8217;s safe harbor as it applies to certain forward-looking statements isn&#8217;t triggered by cautionary remarks made by defendants over the impact of &#8220;potential deterioration in the high-yield sector&#8221; if, per the plaintiffs&#8217; claim, the defendants knew the deterioration was taking place. The SEC made its comments in an amicus curiae brief to the U.S. Court of Appeals for the Second Circuit.<\/p>\n<p>The case is Slayton v. American Express Co. The class securities fraud action alleges that the defendant engaged in faulty disclosures related to losses in its high-yield investment portfolio. A district court dismissed the complaint over failure to plead scienter. The plaintiffs appealed the case, and the Second Circuit heard oral argument lat October.<\/p>\n<p>The SEC&#8217;s statements address the application of the statutory safe harbor to specific statements that Amex made in its May 2001 Form 10-Q&#8217;s Management&#8217;s Discussion and Analysis section. Amex stated that the $182 million in high-yield losses was a reflection of it high-yield portfolio&#8217;s ongoing deterioration. Amex also stated that total investment losses for the rest of 2001 were expected to be significantly lower than losses sustained during the first quarter. <\/p>\n<p>The parties disagreed about whether the cautionary language that Amex used was &#8220;meaningful&#8221; enough for the purposes of safe harbor.<\/p>\n<p>According to the SEC, forward-looking statements in the MD &amp; A, which isn&#8217;t part of a financial statement that abides by generally accepted accounting principals, doesn&#8217;t fall within the statutory exclusion for these kinds of statements. It also noted that Amex&#8217;s statement about the &#8220;potential deterioration in the high-yield sector&#8221; wasn&#8217;t enough for safe-harbor purposes because the defendants were warning about a possible deterioration that they knew was already happening. The SEC says that &#8220;It is misleading and therefore insufficient for a company to warn of a \u2028potentiality that it is aware currently exists.&#8221; Also, &#8220;If the speaker knows that any of the implied representations is false,\u2028 then the speaker knows that the statement is misleading.&#8221;<\/p>\n<p>Misstatements and omissions by an investment adviser, a broker, or an investment firm, can be grounds for a securities fraud claim or lawsuit if financial losses were sustained by others. <\/p>\n<p><strong>Related Web Resources:<\/strong><br \/>\n<a href=\"https:\/\/www.sec.gov\/litigation\/briefs\/2010\/slayton0110.pdf\">Read the SEC&#8217;amicus curiae brief <\/a>(PDF)<\/p>\n<p><a href=\"https:\/\/www.lectlaw.com\/files\/stf04.htm\">Private Securities Litigation Reform Act<\/a>, Lectlaw  <a href=\"https:\/\/www.investorlawyers.com\/blog\/sec-warns-that-disclosure-of-a\/#more-642\" class=\"more-link\">Continue Reading \u203a<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>According to the US Securities and Exchange Commission, the Private Securities Litigation Reform Act&#8217;s safe harbor as it applies to certain forward-looking statements isn&#8217;t triggered by cautionary remarks made by defendants over the impact of &#8220;potential deterioration in the high-yield sector&#8221; if, per the plaintiffs&#8217; claim, the defendants knew the deterioration was taking place. The [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[3915,3752,3801],"tags":[],"class_list":["post-642","post","type-post","status-publish","format-standard","hentry","category-american-express-co","category-financial-firms","category-sec"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>SEC Warns that Disclosure of a \u201cPossible Risk\u201d is Misleading When the Event has Already Occurred &#8212; Investor Lawyers Blog &#8212; February 3, 2010<\/title>\n<meta name=\"description\" content=\"According to the US Securities and Exchange Commission, the Private Securities Litigation Reform Act&#039;s safe harbor as it applies to certain &#8212; February 3, 2010\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.investorlawyers.com\/blog\/sec-warns-that-disclosure-of-a\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"SEC Warns that Disclosure of a \u201cPossible Risk\u201d is Misleading When the Event has Already Occurred &#8212; 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