When I write about this, sometimes I get complaints from securities lawyers who say “no, securities fraud doesn’t work that way: You are not required to disclose everything immediately, and it is only securities fraud if the company puts out some misleading disclosure. Just not mentioning a bad thing is not fraud.” 6 And so in fact the technical game of “everything is securities fraud” is that you have to find something that the company did say that turns out not to be true in light of the bad thing. A classic that we have discussed a few times is that, if a company has a public code of ethics saying “our executives are not allowed to do bad stuff,” and they do bad stuff, then you sue the company because its code of ethics is misleading. Or if the company has a risk factor that says “bad stuff might happen and that would be bad,” and the bad stuff has already happened, then that risk factor is misleading.
Or, here, if the company fires an executive for having an intra-office affair, and it puts out a press release saying that he “separated from the Company following the Board’s determination that he violated company policy and demonstrated poor judgment involving a recent consensual relationship with an employee,” but it doesn’t say that he had several consensual relationships with employees, well, I guess that use of the singular is misleading?
‘Enforcement 40’ for 2020
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