Lugar de Noticias Haynes and Boone
Breaking Bad News to the Public
Gregory R. Samuel
Full disclosure, the cornerstone of federal securities regulation, is sometimes seen by those on the outside as being a rather simple directive for public companies to follow. However, in the case of a financially troubled company or a company that has bad news to break to the public, the duty of full disclosure can be very troublesome and made more difficult by both the risk of liability under the securities laws and the likelihood of being judged by "20-20 hindsight." The issues that a company and its lawyers will encounter when faced with bad news are (i) whether there is a duty to disclose the bad news, (ii)whether the company can delay breaking the news to the public, (iii) whether there is a duty to update a prior optimistic disclosure that proves untrue, and (iv)how the company should deal with analysts and the press when breaking news to the public. The purpose of this outline is to discuss the problems associated with disclosing bad news and to give a company guidance when dealing with these issues.
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