SEC Urges Current and Forward-Looking Disclosure on COVID-19 Impacts

Chairman Jay Clayton of the U.S. Securities and Exchange Commission and William Hinman, director of the Division of Corporation Finance, issued a statement stressing the importance of current and forward-looking disclosure in our collective fight against the COVID-19 pandemic. By regulatory standards, the April 8, 2020 statement is relatively brief and straightforward.

Public companies will be issuing earnings releases and conducting analyst and investor calls in the upcoming weeks, and the chairman and director stressed that these calls would not be routine given the COVID-19 pandemic. These releases and calls have traditionally provided predominately historical quantitative information. But, given the current environment, such historical information may be relatively less significant. The chairman and director urged companies to provide as much information as practicable regarding their current financial and operating status, as well as their future operational and financial planning.

The chairman and director requested companies to reflect the current state of affairs and address specifically:

• Where the company stands today, operationally and financially
• How the company’s COVID-19 response, including its efforts to protect the health and well-being of its workforce and its customers, is progressing
• How its operations and financial condition may change as the efforts to fight COVID-19 progress

In particular, companies should strive to provide detailed discussions of:

• Current liquidity positions and expected financial resource needs
• Impact on operations as a result of efforts to protect the health and well-being of employees and customers
• Actual or projected material effect of financial assistance under COVID-19-related federal and state programs such as the Coronavirus Aid, Relief and Economic Security Act, or CARES Act

The chairman and the director went on to note the difficulties inherent in providing detailed information regarding future operating conditions, especially as most companies’ response strategies are in their early stages, but stressed the importance of providing as much disclosure as possible, in part to enhance communication and coordination across our economy. They also encouraged companies to avail themselves of the safe harbors for forward-looking statements, stating that they do not expect the SEC to second-guess good faith attempts to provide appropriately framed forward-looking information.