The U.S. District Court for the Southern District of New York, among the most important courts in the country for securities suits, has recently held that there exists no per se duty to disclose regulatory investigations, or even Wells Notices, to shareholders under Section 10(b) of the Exchange Act or Rule 10b-5. As the court previously decided in Richman v. Goldman Sachs Group, Inc., “[a] Wells Notice may be considered an indication that the staff of a government agency is considering making a recommendation, but that is well short of litigation.” In the context of an issuer of securities’ duty to disclose, “[w]hen the regulatory investigation matures to the point where litigation is apparent and substantially certain to occur, then 10(b) disclosure is mandated . . . Until then, disclosure is not required.”
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