Court Holds a Wells Notice Does Not Trigger an Automatic Disclosure Obligation for Public Companies

July 09, 2012
A U.S. District Court in New York recently ruled that a public company could not be sued for fraud under the federal securities laws for failing to disclose that it had received a Wells Notice from the Securities and Exchange Commission. In addition to holding that receipt of a Wells Notice does not trigger an automatic disclosure obligation, the opinion offers some guidance on the difficult question of when a company should disclose a governmental investigation. This update discusses the opinion and its implications for companies facing such questions.