Every lawyer that represents a U.S. public company will at some point in that lawyer’s career get an anxiety-filled call from a client (very often late in the day on a Friday), with the unwelcome news of misconduct on the part of some employee, director or officer of the company. Such misconduct can involve serious accounting improprieties, disclosure failures, criminal or civil actions involving the company and/or management, scandalous personal indiscretions, threatened disciplinary actions, fraud, false statements, or omissions, bribery or forgery. Whether or not such matters directly involve the company, the two most critical questions that will be raised will be what must be disclosed with respect to the matter and when must the matter be disclosed. The following checklist is intended to highlight certain guideposts that are important to consider while analyzing these questions.

Materiality

Is the information “material” within the meaning of federal securities laws?

• Consider this analyses based on the information as it becomes available with sufficient level of confidence to be actionable and in light of the specific factors mentioned below.

• Consider the quantitative impact of any non-compliance in relation to earnings, balance sheet items, cash flow, forecasts and budgets.

• Consider the qualitative impact of any non-compliance in relation to the company’s strategy, prospects, senior management and management controls. In Staff Accounting Bulletin 99, the SEC also noted the following among a non-exhaustive list of qualitative matters to consider: whether the misstatement concerns a segment or other portion of the registrant’s business that has been identified as playing a significant role in the registrant’s operations or profitability; whether the misstatement affects the registrant’s compliance with regulatory requirements; whether the misstatement affects the registrant’s compliance with loan covenants or other contractual requirements; whether the misstatement has the effect of increasing management’s compensation; and whether the misstatement involves concealment of an unlawful transaction.