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SEC Urges Companies to Provide Robust, Forward-Looking Disclosure on COVID-19 Impact in Earnings Releases and Investor Calls

In anticipation of the raft of earnings releases and analyst and investor calls that will take place in the next few weeks, the U.S. Securities and Exchange Commission (SEC) issued a public statement in which SEC Chairman Jay Clayton and Director of the Division of Corporation Finance William Hinman urge issuers to provide robust, forward-looking disclosures regarding the impact of COVID-19 in their upcoming earnings releases and analyst and investor calls. The statement argued that robust, forward-looking disclosure will not only provide benefits to investors and companies, it also will enhance valuable communication and coordination across our economy. 

The statement recites a number of observations that give rise to the recommendation to provide fulsome, forward-looking disclosure:

  • Our collective national effort to mitigate the COVID-19 pandemic has caused a profound contraction in vast areas of our economy, and has prompted increased volatility and uncertainty in our capital markets.

  • Many, if not most, businesses are facing profound challenges.

  • Many of our citizens are confronted with employment, economic, and health challenges.

  • There is broad support for this national, full-mitigation response to COVID-19, but there is also broad recognition that our strategy must be flexible and must evolve to effectively address the health risks of COVID-19, while fostering a meaningful, responsible increase in economic activity.

  • Executing such a national strategy will require constant coordination among workers, consumers, businesses, governmental authorities and investors, and manufacturers, suppliers, and distributors.

The statement casts forward-looking disclosure as a significant part of the national effort to fight COVID-19, to support the economy, and to enhance market integrity. The statement suggests that, in addition to providing benefits to investors and companies, robust, forward-looking disclosures will enhance valuable communication and coordination across our economy and will foster confidence in countless specific instances, for example, between a supplier and a manufacturer.

The statement asserts that an issuer’s disclosure should reflect the current state of affairs and outlook, addressing (a) the issuer’s current operational and financial status, (b) how the issuer is affected by the COVID-19 pandemic, (c) how the issuer is responding to the pandemic, (d) how the issuer’s response, including its efforts to protect the health and well-being of its workforce and its customers, is progressing, and (e) how its operations and financial condition may change as the efforts to fight COVID-19 progress and evolve. The statement recognizes that the provision of detailed information regarding future operating conditions and resource needs is challenging, including because COVID-19 response strategies are in their incipient stages (and are likely to change), but notes that at this historic moment, robust, forward-looking disclosures are absolutely necessary to support a healthy marketplace and suggests that updating and refining these estimates should become less difficult over time.  

Detailed forward-looking statements relating to an issuer’s future operations and financial condition are inherently difficult to construct, as such statements are based upon assumptions about the future; and given the unique nature of the pandemic, the future is extremely uncertain.  Nevertheless, the statement argues that any information shared will benefit investors, will benefit the issuer itself, and will benefit the nation’s effort to fight COVID-19. The statement makes the unprecedented observation that historical information may be relatively less significant than robust, forward-looking disclosures in these peculiar circumstances.  Additionally, the statement’s authors point out there are safe harbors for forward-looking statements and that they would not expect good faith attempts to provide appropriately framed, forward-looking information to be second guessed by the SEC.

© 2020 Schiff Hardin LLP


About this Author


For more than 30 years, Ralph V. De Martino has devoted his practice to the representation of public and private companies, the officers and directors who serve them, and financial institutions, broker-dealers and associated members. Mr. De Martino is distinguished among his peers in matters involving public and private company capital formation, securities offerings, regulatory inquiries and enforcement proceedings, internal investigations, and corporate finance and governance matters. He regularly appears before the U.S. Securities and Exchange Commission, FINRA and securities...

Arthur Mitchell Corporate Lawyer Schiff Hardin

Art is a member of the Corporate and Transactional group. He assists on a variety of transactional matters for both public and private companies, including mergers and acquisitions, private equity transactions, government contracting, general contract drafting, and general corporate governance issues. Art employs a pragmatic mindset when assessing his clients’ needs to map out clear expectations and long-term solutions.

Before attending law school, Art served as Deputy Director of Legislative Affairs for Illinois Attorney General Lisa Madigan. In that role, he advanced policy positions and advocated for statutory changes before the members of the Illinois General Assembly and the Office of the Governor. His experience in government strengthened his ability to communicate complex matters to a diverse audience and discover common interests among stakeholders.