On March 23, 2020, the Co-Directors of the SEC's Enforcement Division warned of the "importance of maintaining market integrity" in these uncertain times. Specifically, they urged public companies to be mindful of Regulation FD and insider trading laws, as rapidly changing market conditions could heighten the risks of violating such laws. Also, on April 8, 2020, the SEC Chairman and the Director of Corporation Finance encouraged companies to make robust forward-looking disclosures to provide the investing public access to high-quality financial information, even if some projections might have to be "update[d] and supplement[ed]" at a later date.
These statements by the SEC staff and its Chairman should alert companies to particular enforcement and litigation risks during the ongoing COVID-19 pandemic, which we discuss further: (1) Regulation FD enforcement; (2) insider trading; (3) securities fraud liability based on a purported duty to correct or to update prior forward-looking disclosures; (4) misleading statements outside of public filings; and (5) securities fraud class action lawsuits.
Authored by Ann Kim, Jon Talotta, Jordan Teti, and Ashley King