Page 97 - Initial Public Offering - An Introduction to IPO on Wall Street

considered relevant includes large financial transactions, new goods or services, asset
purchases or disposals, changes in dividends, and changes in upper management or power.

The reporting of such data should be done as soon as (1) it is fairly precise and (2) the
organization has full data. Usually, this information is communicated via news releases, but
businesses can also plan to submit updates directly to their shareholders. Generally, through
legal counsel, the need to reveal details should be addressed.

It should be mentioned that when a report or public statement reveals material non-public
information relating to the operating results or financial situation of a registrant, Item 2.02 of
Form 8-K mandates that the disclosure be documented and provided within four business days
as disclosure on a Form 8-K filing.

Moreover, Regulation FD mandates that when an issuer or an individual acting on its behalf
reveals material non-public information to specifically mentioned individuals (generally
securities market practitioners and issuer securities holders who are in a position to trade on
the grounds of such information), such data must be made public.

Comply with Safe Harbor Provisions

For forward-looking claims, such as estimates, predictions, and other similar reports in the
MD&A, the Private Securities Liability Reform Act of 1995 offers a safe harbor. A safe harbor
requires registrants to report forward-looking data and, if the forward-looking information does
not materialize, safeguards them from investor litigation.

This defense does not apply to claims proven to be false when released. Any type of written
correspondence (e.g. correspondence with shareholders, press releases,) as well as verbal
communications (e.g. conference calls, analyst meetings) containing forward-looking data is
protected by a secure harbor.

It should be mentioned that, for past financial reports or forward-looking statements contained
in IPO registration statements, the safe harbor clause is not valid. The legislative safe harbor,
however, does not substitute or change the existing judicial "bespeaks caution" rule modeled
on the safe harbor rules.

The poignant rule of bespeaks relates to registration statements and usually specifies that to the
degree that an offering document (such as a prospectus) includes a forward-looking disclosure
with appropriate salutary language, a proceeding initiated as a result of such disclosure may be
refused on those grounds.

Forward-looking statements must be specifically identified as such by the corporation to take
advantage of the safe harbor clause and must be followed by a salutary disclosure outlining the
risk factors that could preclude the realization of forward-looking data. The following two
things should be noted when looking to satisfy these requirements:

1. The forward-looking disclosures should be listed clearly. The forward-looking statement
does not explicitly define a general statement such as" certain details included in this annual
report are forward-looking...”
2. To obtain immunity under a safe harbor, not every risk factor needs to be reported.
However, as substantive salutary words, "Boilerplate warnings" will not be sufficient.

A corporation is not bound by the statutory safe harbor provision to amend forward-looking
disclosures. While businesses are not needed to amend such details legally, significantly

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