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Concealment of Material Business Trends

Securities and Exchange Commission (“SEC”) Regulation S-K, Item 303, requires companies to provide specific information in their annual and quarterly financial reports regarding liquidity, capital resources, operations, off-balance sheet arrangements, and contractual obligations. Companies are required to identify important known trends or events under those categories. Item 303 also requires the more general disclosure of all information that a company believes is “necessary to an understanding of its financial condition, changes in financial condition and results of operations.” The disclosure requirements of Item 303 are broad, and encourage companies to adopt a policy of full disclosure towards their shareholders.

If a company fails to provide Item 303 required information, that may give rise to a claim for securities fraud. Under the securities laws, companies cannot publish materially false or misleading statements. If, for example, a company is discussing its operations positively, but does not disclose a recent slowdown in sales, that may render the positive statements about operations misleading. Another instance that may run afoul of Item 303 is when a company fails to disclose the loss of a major contract. Companies are free to negotiate contracts, but if an important contract has been lost, that information must be disclosed under Item 303. Failure to disclose such a development might render a company’s optimistic statements or forecasts about its future performance false, or at the very least misleading.

A successful securities fraud claim based on concealment of a material business trend or event requires an experienced securities fraud attorney with an understanding of the securities laws, Item 303, and the interaction between the two. The securities fraud attorneys at GPM have the skill to prosecute such claims.

If you believe that a company concealed important information regarding its business trends or events, please contact the securities fraud attorneys at GPM.

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