SEC Issues Guidelines For Registrant Self-Reporting Of Material Misstatements & Omissions

In times of economic uncertainty, publicly traded companies find themselves dealing increasingly with the question whether to report – and how to report – unpleasant operational and financial issues. Among these difficult disclosures are corrections to previous reports filed under the Securities Exchange Act of 1934 due to recent discoveries of previously unknown circumstances and facts that make inaccurate one or more matters disclosed in the earlier reports. Not uncommonly, companies find themselves in this situation because they were misled by their own employees’ misstatements. In the past, one’s diligence in making timely, accurate disclosure of newly discovered problems often was rewarded with SEC investigations and enforcement actions. However, a recent SEC release provides guidance for public companies to avoid or minimize sanctions for Exchange Act violations that result from employee misconduct.