Companies under US Securities and Exchange Commission (SEC) investigation focus on marshaling the facts, defenses and related strategies during the course of the investigation and making presentations to the enforcement staff. However, there is also a parallel issue that companies often grapple with: whether the investigation should be publicly disclosed. In general, public companies under investigation are not required to disclose the existence of the investigation to the public. However, even without an independent duty to disclose, case law dictates that if a company speaks on an issue, it has a duty to tell the whole truth.[1]
The US Court of Appeals for the Second Circuit’s recent decision in Noto v. 22nd Century Group, Inc. is a wake-up call for companies to consider disclosing an SEC investigation when they have disclosed the transactions or activities that are the subject of the investigation where there has otherwise been no disclosure of the investigation itself. Failure to do so may result in the sustaining of fraud claims in private litigation for not disclosing an SEC investigation.
In Noto, the complaint against a public company and two executives alleged that the defendants failed to disclose an SEC investigation into the company’s internal control over financial reporting. The company disclosed in SEC filings that management had concluded that material weaknesses existed in its internal control over financial reporting and that it had undertaken...
Days after Hayden Panettiere recalled being put in bed with a well-known man by someone she trusted, social media sleuths zeroed in on one name Diana Jerkins. The former Real Housewives of Beverly...