Gaming The System

A column (via in the May 18 edition of the New York Law Journal discusses the post-Dura case law on loss causation and what it means for corporate disclosures. The author, Professor John Coffee, speculates that companies may be tempted “to write press releases in a code that discloses consequences, but not causes” so as to avoid creating a direct connection between the revealing of a misrepresentation and a stock price decline. Note that some of the judicial decisions discussed in the column previously have been summarized on The 10b-5 Daily, including the D.E. & J. Limited Partnership and Cornerstone Propane cases.

Quote of note: “In any event, one prediction seems particularly likely: the old-fashioned corrective press release may gradually give way to a series of more nuanced communications, often made through third parties, that hint at a problem and intend that the market recognize the problem slowly and incrementally.”

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