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Why In-House Counsel Need to Watch for Insider Trading, Public Disclosure Issues From COVID-19

Corporate Counsel

11 Mar 2020

Three Morrison & Foerster partners on the firm’s COVID-19 Task Force spoke to Corporate Counsel about concerns facing companies as a result of the coronavirus, which has spurred a couple of weeks of extreme volatility in financial markets.

“Company counsel for all public and private companies right now should be considering coronavirus-related insder training,” Haima Marlier said. “Federal securities laws prohibit buying or selling securities on MNPI. This is a really important time right now for organizations to take active steps to mitigate the risks that their employees trade on coronavirus MNPI or disseminate that information to others who may trade.”

David Lynn added that he has been counseling clients on how to handle their disclosure requirements. “It’s a hot topic among public companies,” he said, adding that “the most frequent issues are clients focused on manufacturing who have facilities in mainland China and Europe and particularly Italy. To date that has been the bulk of the reason for questions because they either have productive facilities or logistics or other things within the highly infected areas.”

“You have a crisis situation in which people less accustomed to the rules regarding material nonpublic information could become aware of a significant setback on their company that has not been public, and in a volatile period in which people are looking to sell stocks, this is a step that could easily get missed,” David Newman said, comparing coronavirus risk to cyber breach risk.

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