SEC Alleges GC, Public Corporation Committed Securities Fraud by Failing to Disclose a Potential DOJ Settlement
January 16, 2017
Late last year, in an unprecedented course of action, the Securities and Exchange Commission (the ‘‘SEC’’) filed a complaint against RPM International Inc. (‘‘RPM’’) and its general counsel, Edward Moore, which should give general counsel and publicly traded companies cause for concern. Specifically, the SEC alleged that RPM and its general counsel violated federal securities laws by failing to accrue for and to disclose the value of a potential settlement with the Department of Justice (‘‘DOJ’’) relating to a sealed qui tam complaint at the center of an ongoing DOJ investigation. The complaint alleges a parade of internal disclosure horribles. At its core, however, the complaint makes questionable assumptions regarding the precision with which publicly-traded companies and officers responsible for making such disclosures under the federal securities laws can—and, indeed, should—disclose their anticipated posture in ongoing government investigations and litigation.
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