Chapter 5  Safe Harbors for Forward-Looking Statements — The PSLRA, the SEC,
 and Bespeaks Caution

Hypothetical 5 – Questions

We cannot do justice to the PSLRA safe harbor for forward-looking statements. Without minimizing its significance, it has not been as large an impediment to bringing a private action and surviving a motion to dismiss as its critics assumed. The full potential in this respect may not have been realized as yet. We will limit our discussion to the first 10 questions.

  1. President Clinton’s veto of the PSLRA, which Congress overrode, in effect (to use the language of some of his more vocal supporters), was based in part on the view that the PSLRA safe harbor for forward-looking statements was a “license to lie.” What aspects of the PSLRA safe harbor lend credence to that contention and how credible is the contention? See §§  5.7, 5.8, 5.9, 5.12.
  2. Does the PSLRA safe harbor apply to an IPO? See §  5.2.
  3. What are the three prongs of the PSLRA safe harbor for forward-looking statements?
  4. How does he PSLRA safe harbor differ from the Commission’s Rule 175 (and exchange act counterpart) safe-harbor? Are there situations in which the Commission’s safe harbor apply to forward-looking statements to which the PSLRA safe harbor is not applicable? See § 5.2, 5.31.
  5. When is a forward-looking statement false and misleading? How is it impacted by the PSLRA? Is a forward-looking statement false or misleading if it does not have a reasonable basis? If accompanied by cautionary statements? See § 5.13.
  6. In order to claim the safe-harbor what conditions must have been complied with (or put otherwise, assuming the plaintiff has the burden, what must plaintiff negate in its pleadings) in order for the safe harbor to be available? See § 5.8. See the Amended complaint in In re Enron (at par. 985 ), does it meet those requirements?  What was Judge Harmon's view in that regard? Click HERE and HERE (use Find (ctrl+f) and [safe harbor] as your search term). Was she correct? See § 5.13.
  7. How does the PSLRA safe harbor impact Rule 9(b) as applied to pleading a Securities Act Section 11 claim relating to a forward-looking statement included in a prospectus? See § 5.12.
  8. To what extent does the PSLRA protect forward-looking statements made by an underwriter? See § 5.3.
  9. Does the PSLRA safe harbor protect oral forward-looking statements? Under what circumstances? By whom? See § 5.11.
  10. In order for the company to be responsible for a forward-looking statement under the PSLRA, to whom must it be attributable and by whom must it be made? See § 5.15.
  11. How would you define soft-information? Are misrepresentations of forward-looking soft-information actionable? Do they require compliance with the PSLRA forward-looking qualifications to be protected? See § 5.22 - § 5.24?
  12. Is there any obligation to disclose soft-information? See §  5.25 - § 5.27.
  13. Are statements of historical and/or existing facts protected by the PSLRA safe harbor? See § 5.10. What if they are part of a list of assumptions or other statements some of which are historical, but others are forward-looking? Are they protected by the PSLRA? See § 5.20, § 5.21.
  14. Is the bespeaks caution doctrine applicable after the PSLRA? When might it apply? What is its basic rationalization and is it applicable to Securities Act Section 11 claims? See § 5.32.
  15. Is bespeaks caution applicable to existing or historical facts? See § 5.32. Is it applicable to a forward-looking statement that does not have a reasonable basis? See § 5.33, § 5.34, § 5.36. When is it applicable if the cautionary statements are in a different document? See § 5.35.
  16. There are few disclosure counsel, if any, that in connection with press releases, telephone or other conferences, documents filed with the SEC, do not attempt to utilize the protection afforded by the PSLRA. Some of them are amazingly haphazard in this regard. How would you instruct a client as to the ABCs of assuring that it has the benefit of the PSLRA safe harbor with respect to a forward looking statement included in a filed document? A presentation to analysts? The Form 8-K reporting that presentation under the Fair Disclosure Regulation? A press release? On your own.