Disclosure Custom And Practice Analysis In Securities Class Actions

In securities class actions alleging violations of Section 10(b) of the Securities Exchange Act of 1934 or Section 11 of the Securities Act of 1933, many claims of alleged misstatements or omissions arise in areas of a company’s disclosures that are principles-based and provide management with the flexibility to determine disclosures in the context to the company’s facts and circumstances. In responding to such claims, it has proven effective for companies to retain an expert who can assess the allegations through the lens of disclosure custom and practice. When disclosures involve managerial judgment, custom and practice may provide a framework that guides that judgment.

When drafting these disclosures, companies often look at the evolving customs and practices of comparable companies. In her article “Disclosure Custom and Practice Analysis in Securities Class Actions” published in Westlaw Today, Director Simona Mola explains how expert analyses can provide critical insights for evaluating whether the company’s disclosures were consistent with customs and practices. The goal of such analysis is not to offer an opinion as to whether a particular disclosure was legally compliant or whether a specific omission was material under the securities laws but rather to assist fact finders by providing an expert opinion as to whether the company’s disclosures fell within what was customary at the time.

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