Forward-Looking Statements

Soft Information

Voluntary Disclosure of Forward-Looking Information

Since 1978, SEC safe harbor rules permit forward-looking information in SEC filings unless it is shown the statement was made “without reasonable basis” or disclosed “other than in good faith.” Rule 175 (Securities Act); Rule 3b-6 (Exchange Act).

This administrative safe harbor focuses on what management knows or should know when it looks to the future—a subjective test. The federal courts and Congress have created safe harbors for forward-looking statements that focus on what disclaimers and cautions accompany these statements to investors—an objective test.



Mandatory Disclosure of Forward-Looking Information

Since 1989, the SEC has required the presentation of soft information in the management discussion and analysis (MD&A) of certain SEC filings. The MD&A must describe trends and uncertainties that are “reasonably likely to result” in material changes to the company’s financial position, under Item 303, Regulation S-K.

The MD&A should not only mention known trends and risks, but also analyze their potential effects on the company using tables and numbers—“what keeps management up at night.” The MD&A should also describe the quality and potential variability of earnings, so investors can determine whether past performance is indicative of future performance. MD&A Guidance, Securities Act Rel. No. 8350 (2003).



Actionability of Forward-Looking Statements

A forward-looking statement carries a number of testable factual assertions: the speaker genuinely holds her opinion; there exists a reasonable basis for her opinion; there is nothing that contradicts the opinion. Forward-looking statements can be seen as false if one of these implicit assertions is false.