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Second Circuit Provides Guidance on Forward-Looking Statements

18 June 2010

SEC Update

The U.S. Court of Appeals for the Second Circuit recently ruled in Slayton v. American Express Co. that forward-looking statements by American Express regarding anticipated losses on its high-yield debt investments were protected by the safe harbor from antifraud liability afforded to such statements by the Private Securities Litigation Reform Act of 1995 (PSLRA). Although American Express prevailed in the case, the Second Circuit found that the company had failed to accompany its forward-looking statements with the "meaningful cautionary statements" required by the PSLRA's disclosure standard. In its analysis of the deficiencies of the company's disclosure, the court provided important guidance on the factors that are critical to successful reliance on the safe harbor, at least by companies within the jurisdiction of the Second Circuit. The court's decision is available at 604 F.3d 758, 2010 WL 1960019 (2d Cir. May 18, 2010). This update provides a summary of this guidance.

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