Changes of position
Forward-looking statement rules for listed companies
Short answer
- US safe harbor
- 15 U.S.C. 78u-5 1
- US duty to update
- None imposed by the safe harbor section 1
- UK issuer liability
- FSMA 2000, Schedule 10A 4
- EU market abuse regulation
- Regulation (EU) No 596/2014 of 16 April 2014 3
- Australian guidance
- ASIC RG 170, issued 1 April 2011 5
What counts as a forward-looking statement in US law
Section 78u-5 of Title 15 of the US Code sets out the application of the safe harbor for forward-looking statements 1. Its definition covers projections of financial items such as revenues or earnings, statements of the plans and objectives of management for future operations, statements of future economic performance and statements of the assumptions behind them 1.
The US safe harbor
A covered person is not liable in a private action for a forward-looking statement if it is identified as forward-looking and accompanied by meaningful cautionary statements identifying important factors that could make actual results differ 1. The safe harbor applies as well if the statement is immaterial, or if the plaintiff fails to prove the statement was made with actual knowledge that it was false or misleading 1.
Section 78u-5(d) says nothing in the section imposes on any person a duty to update a forward-looking statement 1.
- The safe harbor is lost for issuers that issue penny stock or make the statement in connection with a blank check offering, a rollup or a going private transaction 1.
- It is lost as well for issuers with certain convictions or antifraud orders in the three years before the statement 1.
| Excluded from the safe harbor | Statutory wording |
|---|---|
| Financial statements 1 | Included in a financial statement prepared under GAAP accounting principles 1 |
| Investment companies 1 | Contained in a registration statement of, or otherwise issued by, an investment company 1 |
| Tender offers 1 | Made in connection with a tender offer 1 |
| IPOs 1 | Made in connection with an initial public offering 1 |
| Partnerships and LLCs 1 | Made in connection with an offering by a partnership, limited liability company or direct participation investment program 1 |
| Ownership reports 1 | Made in a disclosure of beneficial ownership filed under section 78m(d) 1 |
United Kingdom: liability for published information
Schedule 10A to the Financial Services and Markets Act 2000 deals with the liability of issuers in connection with published information 4. Paragraph 3 makes an issuer liable to pay compensation to a person who relied on published information and suffered loss 4.
The issuer is liable for an untrue or misleading statement only if a person discharging managerial responsibilities within the issuer knew the statement to be untrue or misleading or was reckless as to whether it was 4. For an omission, a manager must have known it was a dishonest concealment of a material fact 4. Paragraph 7 says the issuer is not subject to any other liability for such losses 4.
EU and UK: disclosing inside information
The EU Market Abuse Regulation, Regulation (EU) No 596/2014 of 16 April 2014, is dated 16 April 2014 and was published on 12 June 2014, according to EUR-Lex 3. The UK kept a version of it, published on legislation.gov.uk 2.
Article 17(1) of the UK version says an issuer shall inform the public as soon as possible of inside information which directly concerns it 2. Article 17(4) lets an issuer delay disclosure on its own responsibility only if immediate disclosure is likely to prejudice its legitimate interests, delay is not likely to mislead the public and it can keep the information confidential 2.
Australia: prospective financial information
The Australian Securities and Investments Commission issued Regulatory Guide 170 on prospective financial information on 1 April 2011 5. It gives guidance on ASIC's approach to the use of forecasts and projections in disclosure documents and Product Disclosure Statements 5. ASIC says it applies to conduct under section 1041H of the Corporations Act 2001 5.
Common questions
Do US companies have to update forward-looking statements?
The safe harbor section says it imposes no duty to update a forward-looking statement 1.
Does the US safe harbor cover IPOs?
No. The statute excludes statements made in connection with an initial public offering 1.
When is a UK issuer liable for a misleading forecast?
Under Schedule 10A, only if a senior manager knew it was untrue or misleading or was reckless about it 4.
Can an EU or UK issuer delay disclosing inside information?
Only if the conditions in Article 17(4) are met 2.
What guides forecasts in Australia?
ASIC Regulatory Guide 170, issued on 1 April 2011 5.
Rules and charges change. Check the official source linked on this page before you pay or travel. Spotted an error? Email hello@statementsofrecord.com.
Sources
- Legal Information Institute: 15 U.S. Code 78u-5, Application of safe harbor for forward-looking statements
- legislation.gov.uk: Regulation (EU) No 596/2014 on market abuse, Article 17
- EUR-Lex: Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation)
- legislation.gov.uk: Financial Services and Markets Act 2000, Schedule 10A, Liability of Issuers in Connection with Published Information
- ASIC: RG 170 Prospective financial information (1 April 2011)
Related
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