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SEC Warns Companies About Stock Price Volatility Disclosures

Feb. 8, 2021, 9:05 PM

Companies looking to raise money amid recent price volatility in their stock should disclose the risks to them and their investors, the SEC said.

The guidance from Securities and Exchange Commission staff Monday doesn’t include any new obligations for companies but emphasizes the importance of using offering documents and other agency filings to report risks during market volatility.

The reminder came as the SEC scrutinizes the wild stock swings involving GameStop Corp. SEC Acting Chair Allison Lee met with Treasury Secretary Janet Yellen and other financial regulators last week to discuss the frenzy.

The guidance included a sample letter the SEC’s Division of Corporation Finance may send to a company if it has questions about its filings. The letter tells the company to include risk factor disclosures addressing recent extreme volatility and the effects of a sudden increase in demand for their stock, among other information.

“The Division of Corporation Finance recognizes the importance of capital formation, including during times of market volatility and when an issuer’s own securities are experiencing extreme price volatility,” the SEC said. “The Division also cautions that such market and stock volatility can create risks for both companies and investors.”

To contact the reporter on this story: Andrew Ramonas in Washington at aramonas@bloomberglaw.com

To contact the editors responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com, Melissa B. Robinson at mrobinson@bloomberglaw.com

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