Securities Litigation - COVID update

Now that we’re on the other side of the election, expect to see a few more statements made from industry organizations looking to shape where regulation may be headed come January...and the timing is, well, curious. The US Chamber of Commerce late last week filed an SEC rulemaking petition suggesting the SEC use its power under the Private Securities Litigation Reform Act, to “exercise that authority without delay and place reasonable limits on securities litigation arising out of the COVID-19 pandemic.” Cooley does a good job wrapping the statement, which suggests that the SEC limit liability for statements “about a company’s plans or prospects to getting back to business, resuming sales or profitability…as long as suitable warnings were attached.” 

However, we touched on this topic last in May 2020, with early returns from law firms showing that plaintiffs’ lawyers had not expanded their reach to a wider range of target companies, and Latham & Watkins coincidentally published its latest review of Securities Litigation Trends During COVID-19, pointing out the specific risks companies should watch for, but also reminding the reader that the number of such lawsuits to date remains limited. The Latham piece points out that plaintiffs have filed a “dozen or so” new complaints about insufficient risk disclosures regarding COVID’s impact on business prospects, and in particular statements around pandemic-related treatments or services (including whether a product or service is effective against COVID) are attracting attention. Either way, the next formal SEC filing many of you will author is the 10-K; it’s a good time to start thinking about how to get ahead of risk with the right disclosure.