Careful Review of Litigation Disclosure in Periodic Reports and Registrations Statement Required Following U.S. District Court’s Decision

As we enter the heart of Form 10-Q review season for calendar year-end companies and look ahead to Form 10-K review season early next year, a recent decision in a securities fraud class action suit reinforces the need to carefully review litigation disclosure in annual and quarterly reports and registration statements.  Members of our Public Company Advisory along with our colleagues in the Complex Litigation & Dispute Resolution practice put together a summary of the court’s decision and our recommendations here: Litigation Disclosure Review After Pegasystems.

Because reserve considerations often drive the litigation disclosure (i.e., accounting firms may indicate that unless a company will state a belief that a particular litigation is without merit, the accounting firm will require the company to establish a reserve for possible loss), it is important to discuss any proposed disclosure with both counsel and the company’s accountants and auditors.