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Securities Compliance Sentinel Analysis of cutting-edge securities industry issues

You May Be Better Off Telling the SEC Before Making Corporate Announcements

Posted in Corporate Governance, SEC Enforcement

The SEC is actively encouraging companies to contact the SEC before making a public announcement.

The SEC has indicated that it has its Staff reviewing Form 8-K disclosures.  These reviews concentrate on changes in auditors, directors or officers.  The SEC Staff then will follow-up with the company to inquire as to the basis for the announcement and its underpinnings.

Additionally, companies, prior to issuing a Form 8-K or other type of information to the public, should consider that other federal regulators will scrutinize the released information.  As such, companies must be prepared to answer these regulator questions.  These regulators are also looking at the functions undertaken by the company in question.  In particular, the SEC has stressed that it will look for a “culture of compliance,” at the company where everyone seeks an ethical culture.  One part of this inquiry will undoubtedly be internal controls and the status of the company’s compliance officer and the internal audit function.

Thus, companies need to be well-prepared before issuing public pronouncements.