The U.S. Supreme Court has agreed to take up a case involving risk factor disclosures in connection with the alleged misuse of Facebook user data by Cambridge Analytica. The case will address a Circuit Court split on the question of what companies must disclose in its risk factors about past instances where risks materialized. As
Since OpenAI launched ChatGPT in November 2022, the race to capitalize on emerging artificial intelligence (AI) technologies has super-charged the financial markets. The stock prices of AI-associated companies, such as Nvidia and Super Micro Computer, have soared. Several AI-related companies — such as, for example, Astera Labs and Rubrik — have recently successfully completed IPOs, so much so that that the long-moribund market for IPOs is showing definite signs of life. Other AI companies – including for example, Zapata and MultiplAI Health Ltd. — recently became public through mergers with SPACs.
With the consuming interest in AI in the financial markets, many companies want to try to catch some of the lightning for themselves. However, what the companies say about AI, their AI prospects, and their AI risks could have significant consequences for the companies’ corporate and securities litigation risks, as well as their risks of regulatory scrutiny.Continue Reading AI, Risk, and Public Company Disclosures
One of the most important ways a company can try to avoid potential liability under the federal securities laws is to incorporate precautionary disclosure in its public statements and regulatory filings. However, in a June 23, 2015 decision in In re Harman International Industries Securities Litigation (here), the D.C. Circuit provided a reminder to companies on the importance of keeping their precautionary disclosures up-to-date.
In the following guest post, Bruce A. Ericson and Stacie Kinser of the Pillsbury Winthrop Shaw Pittman LLP law firm take a detailed look at the D.C. Circuit’s recent opinion and consider the decision’s practical implications for companies’ precautionary disclosures. Ericson is a partner and Kinser is an associate at the Pillsbury law firm. Ericson is also Managing Partner of Pillsbury’s San Francisco Office, and Co-Head of Pillsbury’s Securities Litigation and Enforcement Team. A version of this article previously was published as a Pillsbury client alert and on Law 360.
I would like to thank Bruce and Stacie for their willingness to publish their article as a guest post on my site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Bruce and Stacie’s guest post.
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SEC Rule 10b-5 makes it unlawful to misstate a material fact (or omit to say something if the omission would render misleading what you do say) in connection with the purchase or sale of a security. The Private Securities Litigation Reform Act (PSLRA) created a safe harbor for statements that are forward-looking and accompanied by meaningful cautionary language. In a recent decision, the D.C. Circuit revisited the standard for forward-looking statements, and placed special emphasis on the accompanying cautionary language, holding that statements which fail to account for historical facts cannot be meaningful. The opinion should serve as a timely reminder for companies to review and update their cautionary language.
Continue Reading Guest Post: Court of Appeals Warns Against Complacency in the PSLRA’s Safe Harbor