15 USC 78u-5 - Application of safe harbor for forward-looking statements

U.S Code last checked for updates: Apr 26, 2024

§ 78u–5.

Application of safe harbor for forward-looking statements

(a)

Applicability

This section shall apply only to a forward-looking statement made by—

(1)

an issuer that, at the time that the statement is made, is subject to the reporting requirements of section 78m(a) of this title or section 78o(d) of this title;

(2)

a person acting on behalf of such issuer;

(3)

an outside reviewer retained by such issuer making a statement on behalf of such issuer; or

(4)

an underwriter, with respect to information provided by such issuer or information derived from information provided by such issuer.

(b)

Exclusions

Except to the extent otherwise specifically provided by rule, regulation, or order of the Commission, this section shall not apply to a forward-looking statement—

(1)

that is made with respect to the business or operations of the issuer, if the issuer—

(A)

during the 3-year period preceding the date on which the statement was first made—

(i)

was convicted of any felony or misdemeanor described in clauses (i) through (iv) of section 78o(b)(4)(B) of this title; or

(ii)

has been made the subject of a judicial or administrative decree or order arising out of a governmental action that—

(I)

prohibits future violations of the antifraud provisions of the securities laws;

(II)

requires that the issuer cease and desist from violating the antifraud provisions of the securities laws; or

(III)

determines that the issuer violated the antifraud provisions of the securities laws;

(B)

makes the forward-looking statement in connection with an offering of securities by a blank check company;

(C)

issues penny stock;

(D)

makes the forward-looking statement in connection with a rollup transaction; or

(E)

makes the forward-looking statement in connection with a going private transaction; or

(2)

that is—

(A)

included in a financial statement prepared in accordance with generally accepted accounting principles;

(B)

contained in a registration statement of, or otherwise issued by, an investment company;

(C)

made in connection with a tender offer;

(D)

made in connection with an initial public offering;

(E)

made in connection with an offering by, or relating to the operations of, a partnership, limited liability company, or a direct participation investment program; or

(F)

made in a disclosure of beneficial ownership in a report required to be filed with the Commission pursuant to section 78m(d) of this title.

(c)

Safe harbor

(1)

In general

Except as provided in subsection (b), in any private action arising under this chapter 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 person referred to in subsection (a) shall not be liable with respect to any forward-looking statement, whether written or oral, if and to the extent that—

(A)

the forward-looking statement is—

(i)

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; or

(ii)

immaterial; or

(B)

the plaintiff fails to prove that the forward-looking statement—

(i)

if made by a natural person, was made with actual knowledge by that person that the statement was false or misleading; or

(ii)

if made by a business entity; 1

 So in original. The semicolon probably should be a comma.

was—

(I)

made by or with the approval of an executive officer of that entity; and

(II)

made or approved by such officer with actual knowledge by that officer that the statement was false or misleading.

(2)

Oral forward-looking statements

In the case of an oral forward-looking statement made by an issuer that is subject to the reporting requirements of section 78m(a) of this title or section 78o

(A)

if the oral forward-looking statement is accompanied by a cautionary statement—

(i)

that the particular oral statement is a forward-looking statement; and

(ii)

that the actual results might differ materially from those projected in the forward-looking statement; and

(B)

if—

(i)

the oral forward-looking statement is accompanied by an oral statement that additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statement is contained in a readily available written document, or portion thereof;

(ii)

the accompanying oral statement referred to in clause (i) identifies the document, or portion thereof, that contains the additional information about those factors relating to the forward-looking statement; and

(iii)

the information contained in that written document is a cautionary statement that satisfies the standard established in paragraph (1)(A).

(3)

Availability

(4)

Effect on other safe harbors

(d)

Duty to update

(e)

Dispositive motion

(f)

Stay pending decision on motion

In any private action arising under this chapter, the court shall stay discovery (other than discovery that is specifically directed to the applicability of the exemption provided for in this section) during the pendency of any motion by a defendant for summary judgment that is based on the grounds that—

(1)

the statement or omission upon which the complaint is based is a forward-looking statement within the meaning of this section; and

(2)

the exemption provided for in this section precludes a claim for relief.

(g)

Exemption authority

(h)

Effect on other authority of Commission

(i)

Definitions

For purposes of this section, the following definitions shall apply:

(1)

Forward-looking statement

The term “forward-looking statement” means—

(A)

a statement containing a projection of revenues, income (including income loss), earnings (including earnings loss) per share, capital expenditures, dividends, capital structure, or other financial items;

(B)

a statement of the plans and objectives of management for future operations, including plans or objectives relating to the products or services of the issuer;

(C)

a statement of future economic performance, including any such statement contained in a discussion and analysis of financial condition by the management or in the results of operations included pursuant to the rules and regulations of the Commission;

(D)

any statement of the assumptions underlying or relating to any statement described in subparagraph (A), (B), or (C);

(E)

any report issued by an outside reviewer retained by an issuer, to the extent that the report assesses a forward-looking statement made by the issuer; or

(F)

a statement containing a projection or estimate of such other items as may be specified by rule or regulation of the Commission.

(2)

Investment company

(3)

Going private transaction

(4)

Person acting on behalf of an issuer

(5)

Other terms

(June 6, 1934, ch. 404, title I, § 21E, as added Pub. L. 104–67, title I, § 102(b), Dec. 22, 1995, 109 Stat. 753.)

cite as: 15 USC 78u-5