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Here’s a note from Brink Dickerson of Troutman Sanders:

An almost universal question when a company is subject to a formal or informal SEC investigation is: “Do we need to disclose the investigation?” The traditional advice is: “No, unless the underlying facts in themselves necessitate disclosure.” Comments by the Corp Fin Staff at seminars and elsewhere always have been consistent with this – but the SEC never has issued any formal guidance, which can lead to companies & audit committees second-guessing the soundness of the traditional advice.

In 2012, in Richman vs. Goldman Sachs, the SDNY held that so-called Wells notices – the SEC notice to a potential defendant that the SEC intends to proceed with formal charges unless the potential defendant can convince it otherwise – do not in themselves need to be disclosed. A fortiori, there should be no duty to disclose an investigation either, but that was not the focus of the opinion. More recently, in January 2016, in In re Lions Gate Entertainment Corp. Securities Litigation, the SDNY reached the same conclusion again. What is particularly helpful about Lions Gate is that, in concluding that no disclosure of an investigation or a Wells Notice was required, the Court systematically went through each of the potential disclosure triggers under Section 10, Regulation S-K and GAAP and ruled each out.

This is not to say that there are not plenty of situations when a company might prefer to disclose an SEC investigation – e.g., where the overall situation already has been widely discussed and there is a general desire to shorten the news cycle – but it is to say that companies can rest comfortably that they do not have a disclosure duty unless either (i) the facts underlying the matter being investigated trigger a disclosure obligation independent of the SEC investigation (or Wells notice), or (ii) they make statements about their situation that necessitate discussion of the SEC investigation (or Well notice) in order for their statements not to be misleading.

You may also want to check out these memos – and my “SEC Enforcement Handbook” for a discussion of this topic…

New Lease Accounting Standard: FASB Balloons Balance Sheets

As noted in these memos, the FASB recently issued ASU 2016-02, Leases (Topic 842) that ushers in a new era in which lessees will recognize most leases on their balance sheets (beginning for fiscal years after 2018) – which will increase their reported assets and liabilities – in some cases, quite significantly. Lessor accounting remains substantially similar to current US GAAP.
This analyst report notes that the accounting change may increase debt reported by companies by a staggering $1 trillion…

Transcript: “How to Get Your Equity Plan Approved By Shareholders”

We’ve posted the transcript for the recent CompensationStandards.com webcast: “How to Get Your Equity Plan Approved By Shareholders.”

– Broc Romanek