Disclosures During COVID-19
When the novel coronavirus pandemic took over the world, there wasn’t a person or company whose life was not impacted by COVID-19. The financial markets in particular were significantly influenced, the stock market reeled, and businesses were effectively shut down in many cases.
Once it became apparent that the coronavirus was likely to be an ongoing problem in the world and the U.S., companies needed to figure out how they were going to continue to operate. With that in mind, the U.S. Securities and Exchange Commission (SEC) issued a set of guidelines in late June called the CF (Corporate Finance/CorpFin) Disclosure Guidance Topic No. 9A.
These guidelines provide additional responsibilities that corporations will need to adhere to when disclosing information to potential investors in light of the coronavirus pandemic. Continue reading to learn more about what these guidelines entail and what kinds of consequences corporations can expect to face if these guidelines are violated.
Guidelines for Company Disclosure During the Coronavirus Pandemic
CorpFin generally encourages corporations to provide material disclosures to investors as they evaluate the current and future expected impact of COVID-19. However, these new guidelines suggest that corporations issue disclosures as if they were looking at the expected impact through the eyes of upper management.
This includes analyzing the risks and effects and continuing to issue new disclosures as their circumstances may change over time.
Specifically, CorpFin encourages companies to provide “robust and transparent disclosures about how they are dealing with short- and long-term liquidity and funding risks in the current economic environment, particularly to the extent efforts present new risks or uncertainties to their businesses.”
Considerations CorpFin would like corporations to take into account include:
- Liquidity
- Creditworthiness/risk of default
- Contractual obligations
- Financial metrics
- The extent of CARES Act benefits
- Operational challenges
- Financing arrangements
- Capital expenditure reductions
- Ability to continue operating
- Cash flow management
What Happens If These Guidelines Aren’t Met?
The SEC has reiterated that corporations that fail to issue accurate and complete disclosures as outlined in the CorpFin Disclosure Guidance Topic No. 9A will be handled appropriately.
The SEC is prepared to take aggressive action against companies engaging in misinformation, improper disclosures, and various types of disclosure-related fraud. In fact, they are currently beginning to make inquiries regarding corporations that have received loans under the Small Business Association’s Paycheck Protection Program.
Individuals who may have information regarding suspected disclosure fraud or other securities violations in a particular corporation can reach out to a respected SEC whistleblower lawyer to begin the process of reporting their tips to the SEC. In doing so, whistleblowers may be entitled to a substantial whistleblower award for their efforts in coming forward.
Contact a Respected SEC Whistleblower Lawyer
If you have information about a corporation that is violating the SEC’s corporate disclosure guidelines amid COVID-19, or any other type of securities violation, reach out to a reputable SEC whistleblower lawyer at Meissner Associates. You can reach our office by phone at 1-866-764-3100 or through the online contact form we have included at the bottom of this page.
