Public Company Advisor - August 2012: Second Circuit’s Ikanos Decision Illustrates Pitfalls Surrounding MD&A “Trends and Uncertainties” Disclosure


Item 303 of Regulation S-K requires the disclosure, in a company’s MD&A, of “any known trends or uncertainties…that the registrant reasonably expects will have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations.” A company’s failure to correctly anticipate which known “trends or uncertainties” ultimately will have a material impact and make corresponding disclosures may give rise to litigation in which nondisclosure will be judged in hindsight and with the benefit of knowledge of subsequent events that may not have been foreseen at the time of disclosure.

The Second Circuit Court of Appeals’ recent decision in Panther Partners Inc. v. Ikanos Communications, Inc. threatens to expand the litigation risk posed by Item 303. Although Item 303 requires disclosure only of known uncertainties that an issuer “reasonably expects will have” a material impact, in Ikanos, the Second Circuit held that the plaintiff adequately alleged a claim based on the company’s failure to disclose an “uncertainty” that the court determined “might reasonably” have been expected to materially impact future revenues.

Please see full Newsletter below for more information.

LOADING PDF: If there are any problems, click here to download the file.

Written by:

Published In:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© King & Spalding | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.