On April 8, 2020, US Securities and Exchange Commission (SEC) Chairman Jay Clayton and Division of Corporation Finance Director William Hinman issued a joint statement emphasizing the use of forward-looking information during the coming weeks as public companies will be issuing earnings releases and conducting analyst and investor calls. The SEC urged companies to provide as much information as is practicable regarding their current financial and operating status as well as their future operational and financial planning. In the joint statement, the SEC observed that the national effort to mitigate the COVID-19 pandemic has caused a deep contraction in many areas of the economy, with many businesses and workers facing significant challenges, and that there is broad support for the national, full-mitigation response to COVID-19. The joint statement notes that there is broad recognition that the strategy must evolve to effectively address the health risks of COVID-19 but also responsibly encourage and promote an increase in economic activity. The Chairman and the Division Director believe there now appears to be an emerging consensus that, as we develop more tools to fight COVID-19, we can incrementally foster economic activity.

The joint statement made, among others, the following observations:

• Company disclosures should reflect the current state of affairs and outlook and, in particular, respond to investor interest in (1) where the company stands today, operationally and financially; (2) how the company’s COVID-19 response, including its efforts to protect the health and well-being of its workforce and customers, is progressing; and (3) how its operations and financial condition may change as efforts to combat COVID-19 progress.

• The importance of providing detailed information regarding future operating conditions and resource needs and updating and refining these estimates over time.

• High-quality disclosures will provide benefits to investors and companies and enhance valuable communication and coordination across our economy.

• Transparency can foster confidence between an investor and a company, and can benefit both.

• Companies that include forward-looking disclosures in their SEC filings and communications to investors and shareholders should avail themselves of the safe harbors for such statements, and good-faith attempts to provide appropriately framed forward-looking information will not be second-guessed by the SEC.

The joint statement noted that there is intense interest in knowing where companies stand today and, more importantly, how they have adjusted and expect to adjust their operational and financial affairs in order to work through the pandemic. Producing comprehensive financial and operational reports, particularly reports that include forward-looking information, may present challenges for companies in the current circumstances. The SEC recognizes the challenges involved in producing comprehensive financial and operating reports, especially where forward-looking information about the company is included. The SEC staff has encouraged earnings and related disclosures that are as timely, accurate, and robust as practicable under the circumstances.

The SEC believes that forward-looking disclosures will benefit investors and companies and strongly encourages their use in view of the COVID-19 pandemic. In addition, the joint statement encourages companies to provide, update, and supplement as much forward-looking information as is practicable.

With the SEC’s renewed emphasis on the inclusion of forward-looking statements in SEC filings and communications to shareholders and investors, we think it is important to consider the “safe harbor” protection that was provided to forward-looking statements under Section 102 of the Private Securities Litigation Reform Act of 1995 (PSLRA). In general, in any private action arising under the PSLRA that is based on an untrue statement of a material fact or omission of a material fact necessary to make the statement not misleading, a company that is subject to the reporting requirements of the SEC shall not be liable with respect to any forward-looking statement if the forward-looking statement is identified as a forward-looking statement and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement. In view of the safe harbor protection afforded forward-looking statements under the PSLRA, public communications with shareholders and investors routinely include a disclaimer to the effect that forward-looking statements are based on management’s then current views and assumptions and, as a result, are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected.

The full text of the joint statement of Chairman Clayton and Director Hinman can be found at https://www.sec.gov/news/public-statement/statement-clayton-hinman.