U.S. Changes Affecting Your Business: Refresher On Three Key U.S. Securities Law Fundamentals

Canadian companies will sometimes encounter questions related to fundamental aspects of U.S. securities law. We take a closer look at three topics of special interest below: 10b-5 letters, Regulation FD and SEC comment letters.

1. At a glance: 10b-5 letters

Background. 10b-5 letters are named after Rule 10b-5 under the Securities Exchange Act of 1934—an overarching rule prohibiting fraud in the U.S. capital markets. 10b-5 letters are sometimes called negative assurance letters or disclosure letters or, inaccurately, 10b-5 opinions (they are not legal opinions because they consist of factual statements by counsel rather than counsel’s views on questions of law).

An issue of liability. Under U.S. securities laws, issuers and underwriters are liable for material misstatements and omissions in securities offering materials. Unlike issuers, however, underwriters have a defense to liability if they exercise due diligence in the offering process. The same is true under