Item 303 of SEC Regulation S-K requires, as part of management’s discussion and analysis in an issuer’s registration statements, take-private transactions, annual and quarterly reports, and other filings required under the Exchange Act, the disclosure of “any known trends or uncertainties that have had or that the registrant reasonably expects will have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations.” 17 C.F.R. §229.303(a)(3)(ii) (2012); see also 17 C.F.R. §229.10 (2012). This regulation imposes a duty on management to disclose known facts that do not presently have an effect on sales, revenue or income, but are deemed reasonably likely to do so in the future. On May 25, the U.S. Court of Appeals for the Second Circuit provided guidance on the allegations of a securities representation complaint sufficient to state a claim for failure to disclose a material “uncertainty.” See Panther Partners v. Ikanos Communications, 681 F.3d 114 (2d Cir. May 25, 2012).
At issue in this appeal, Ikanos, a manufacturer of broadband hardware, allegedly failed to disclose, prior to a secondary offering of equity securities, a pattern of defects in one of its lines of semiconductor products. See id. at *1. This secondary offering occurred after customers began to report the defect to Ikanos, but before the extent of the error, or the need for widespread remedial measures, became apparent. See id. at *2.
