The securities law disclosure framework has evolved to encourage^[1]; companies acting in good faith to disseminate relevant projections pertaining to their businesses to the general public "without fear of open-ended liability."^[2] Sharing financial projections and other information about anticipated events and developments—in press releases, earnings calls periodic filings, and prospectuses of registered offerings—has become a routine practice for reporting issuers, but so have the stockholders' lawsuits alleging that such statements were fraudulent when forward-looking statements did not come to fruition or when they contain an error. Many issuers struggle to effectively leverage relevant safe harbors and craft appropriate safe harbor language, potentially inviting plaintiffs to capitalize on such errors.

Key Takeaways

• Available defenses are not always interchangeable.
• Projections must be non-misleading and be made in good faith, which sometimes means following the SEC's understanding of such terms, including the guidelines on the manner of presentation of such projections.
• The most straightforward approach to protecting good faith non-misleading projections is to consistently comply with the Private Securities Litigation Reform Act of 1995 (PSLRA) requirements in drafting safe harbor legends.
• Safe-harbor language should be incorporated not only in SEC filings but also in all other forms of communication containing forward-looking statements, including oral communications and social media posts.
• Safe-harbor language must be meaningful, which necessitates regular review of and adjustment to PSLRA safe harbor templates.

Available Protections

There are three principal defenses available to immunize issuers from liability for forward-looking statements (should the anticipated result not come to pass) and to discourage frivolous litigation by private plaintiffs:

1. Rule 175^[3] promulgated by the SEC under the Securities Act of 1933 (Securities Act) and corresponding Rule 3b-6^[4] under the Securities Exchange Act of 1934 (Exchange Act);
2. amendments to the Securities Act (Section 27A)^[5] and the Exchange Act (Section 21E)^[6] enacted by Congress with the passage of the PSLRA; and
3. the judicially-formulated bespeaks caution doctrine.

The two safe harbor defenses and the bespeaks caution doctrine supplement and do not substitute for each other.^[7] Each provides a powerful liability-insulation tool. Issuers that implement them correctly and develop robust compliance practices will enjoy the maximum protection in the event of litigation. Issuers may also wish to use more than one approach for protecting their forward-looking statements, layering protections where available.

Rules 175 and 3b-6

Enacted under the Securities Act and the Exchange Act, respectively, Rules 175 and 3b-6 shield issuers (excluding registered investment companies) from liability for forward-looking statements contained in documents filed with the SEC. That means that forward-looking statements are devoid of the safe harbor protection:

• in oral statements (other than those affirmed in SEC filings);
• in documents furnished rather than filed with the SEC (such as information furnished under Items 2.02 and 7.01 of Form 8-K); and
• in documents that are neither filed nor furnished with the SEC (such as press releases, social media posts, and other documents not posted on EDGAR).

To invoke protection under Rules 175 or 3b-6, a forward-looking statement must be made in "good faith" and with a "reasonable basis," in compliance with the instructions provided in Regulation S-K Item 10(b). Among other things, Item 10(b) of Regulation S-K (in its post-July 1, 2024 iteration)^[8] clarifies what constitutes a reasonable basis and gives examples of projections that would be considered misleading (and, therefore, outside the Rules 175 and 3b-6 safe harbor). For example, elective projection of only favorable items or presentation of sales or revenue projections without at least one of the measures of income—net income (loss) or earnings (loss) per share—would generally be considered misleading. The SEC Staff also generally considers it misleading to present projections based on historical financial results or operational history without presenting the relevant historical financial results or operational history with equal or greater prominence. Although before July 1, 2024, a legend identifying forward-looking statements and containing meaningful cautionary statements would be sufficient to qualify for safe harbor protection, the issuers should be careful to comply with the new presentation rules.

PSLRA Safe Harbor

The PSLRA provides that, "in any private action … based on an untrue statement of material fact or omission of a material fact necessary to make the statement not misleading [an issuer or controlling person] shall not be liable with respect to any forward-looking statement, whether written or oral."^[9] In addition to protection from liability, the PSLRA has the corollary effect of a stay of discovery (other than discovery that is specifically directed to the applicability of the safe harbor) in all federal and some state courts.^[10] This bestows a major advantage because the cost of discovery is often the main factor causing issuers to settle, and plaintiffs may seek to use discovery to find a sustainable claim rather than to support claims initially alleged in the complaint. The PSLRA safe harbor is available for both oral and written forward-looking statements regardless of the media. Although providing the most extensive protection, the PSLRA safe harbor is available only to public companies and cannot be invoked by certain issuers or in certain circumstances and transactions:

A forward-looking statement within the scope of the PSLRA can enjoy the safe harbor protection if it is (i) made without knowledge that the statement is false or misleading or^[14] (ii) accompanied by meaningful safe harbor language, which is close to the formula of the bespeaks caution doctrine discussed below^[15] and consistent with the requirements of Rules 175 and 3b-6 for cautionary language.

Bespeaks Caution Doctrine

The bespeaks caution doctrine, established, in some form, in every judicial circuit,^[16] is a judicially-created defense insulating forward-looking statements from liability. It is an important line of defense if Rules 175 and 3b-6 or the PSLRA safe harbor is not available. In order to enjoy the safe harbor, the statements must generally be accompanied by sufficient cautionary language and be made without intent to deceive investors. Although the exact standards vary from circuit to circuit, forward-looking statements made by issuers and the accompanying legends prepared in compliance with the PSLRA safe harbor are unlikely to fail to meet the requirements of the bespeaks caution doctrine in any circuit.^[17] Accordingly, compliance with PSLRA safe legending harbor requirements will almost certainly satisfy the cautionary language standards of the bespeaks caution doctrine.^[18] Unlike sister safe harbors, the bespeaks caution doctrine is available to both public and private companies. Hence, such legending should be included in any offering materials, regardless of whether the issuer is a reporting company or whether the offering is registered.

Puffery as an Additional Line of Defense

Immaterial statements cannot form the basis of a false or misleading statement supporting a securities fraud claim. Generally, non-specific expressions of optimism that are not objectively verifiable (not subject to being either proved or disproved) are considered to be mere puffery and, therefore, not actionable as a matter of law, because no reasonable investor would rely upon such statements. This includes vague statements of optimism, obvious qualitative buzzwords, and other statements not specific enough to be objectively verifiable are considered immaterial by default and, consequently, are not actionable.^[19]

As a defense, puffery may give some additional comfort to issuers in freely expressing their general goals and aspirations. For instance, the conclusion that "[at home fitness] is a trend that's here to stay" and the anticipation of a "fantastic year" characterized by "continued momentum in the foreseeable future" as a result of such a conclusion was deemed to be "'textbook cases' of corporate optimism[;]"^[20] the description of a drug or an invention as a "breakthrough" is also likely to be considered a puffery.^[21] Likewise, statements setting a general demeanor of the narrative (for instance, statements such as "successfully executing our growth strategy" and "do[ing] an outstanding job"^[22]) will more likely than not be deemed "puffery.". However, unlike the aforementioned defenses, reliance on a puffery defense should be approached with caution during the review and analysis of an issuer's documents. The effectiveness of a puffery defense heavily depends on specific facts and circumstances as well as potentially subjective interpretation by the trier of fact, evidenced by the wide range of statements that some circuits regard as puffery and other circuits do not.^[23] Moreover, to the extent that statements considered puffery are forward-looking, they can likely be protected by the three previously mentioned defenses with a higher degree of certainty. Despite these considerations, "puffery" provides an additional layer of insulation against potential securities fraud claims, and while not a primary line of defense, it can still be useful in specific situations (for example, in the case of unscripted oral communications). Finally, "puffery" serves as an important reminder that neither the market nor courts expect corporate officials to "present an overly gloomy or cautious picture of current performance and future prospects."^[24]

Maximizing the Safe Harbor Coverage

Issuers should seek to protect each forward-looking statement with the maximum number of available defenses. In an ideal-case scenario, all three protections may be invoked (but see below whether it is worth filing a document to rely on Rules 175 and 3b-6). To achieve this effectively, consider the following strategies.

A PSLRA-compliant safe harbor legend will be sufficient for all three safe harbors

The PSLRA safe harbor offers the broadest protection and an important procedural advantage—a stay of discovery—making it an optimal starting point. It should always be invoked when available. Compliance with the PSLRA legend requirements and ensuring that the forward-looking statements are made in good faith lay the foundation that meets the criteria of both remaining defenses. The bespeaks caution doctrine's protection is assured if the cautionary statement language aligns with the PSLRA safe harbor requirements. Similarly, a PSLRA-compliant safe harbor legend meets the criteria of Regulation S-K Item 10(b) for Rules 175 and 3b-6.^[25] Therefore, the forward-looking statement safe harbor compliance exercise should always start with the preparation of a PSLRA-compliant safe harbor. In situations where the PSLRA is not applicable (e.g., in the case of an IPO), simply removing the reference to the PSLRA in the legend, while keeping the rest unchanged, is the only necessary modification of the legend.

Evaluating the benefit of filing documents to obtain Rules 175 and 3b-6 protection

Forward-looking statements accompanied by a PSLRA-compliant statement or legend and made in good faith will likely be protected under the bespeaks caution doctrine. If such a forward-looking statement is made in a document filed with the SEC, it will also automatically receive protection under Rules 175 and 3b-6. For instance, if the issuer is not eligible for the PSLRA safe harbor protection because it is a limited liability company, its forward-looking statements (made in good faith and accompanied by a PSLRA-compliant legend) in Forms 10-Q and 10-K will be protected under Rules 175 and 3b-6 because periodic reports are filed with the SEC. Analogously, an issuer desiring to include forward-looking statements in its IPO prospectus (REITs, for example, commonly include projections showing future cash available for distribution in the so-called "magic page") can simply prepare a PSLRA-compliant safe harbor legend without the PSLRA reference^[26] to enjoy the protection of Rule 175 because the IPO prospectus is filed with the SEC.

The next consideration is whether to invoke the protection available under Rules 175 and 3b-6 when the forward-looking statement does not otherwise need to be filed. Specifically, the question is whether it is worth applying the protection of the rules to a forward-looking statement, thereby subjecting the statements to liability under Section 18 of the Exchange Act. For instance, an issuer ineligible for the PSLRA safe harbor wishes to discuss its future plans in a press release. Unless the press release is filed with the SEC, the issuer can rely solely on the bespeaks caution doctrine to protect its forward-looking statements. The issuer may elect to file the press release under Item 8.01 of Form 8-K, thereby availing the forward-looking statements in the press release of the protection of Rules 175 and 3b-6, but will face increased risk of exposure to private lawsuits under the higher liability standard of Section 18 of the Exchange Act. This decision is not straightforward, and issuers not eligible to rely on the PSLRA may wish to engage in further examination of the bespeaks caution doctrine case law in the applicable judicial circuit.

General Compliance with the Requirements of the PSLRA Safe Harbor Legend

The requirements of the PSLRA safe harbor legend for both oral and written statements are comprised of two components:

1. forward-looking statements should be meaningfully identified; and
2. the legend must contain "meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement."

Neither component can be effectively addressed with boilerplate language.^[27] Resorting to a generic approach will jeopardize the availability of both the PSLRA safe harbor and the bespeaks caution doctrine.

Create a template of the PSLRA safe harbor legend

Although boilerplate PSLRA safe harbor language may be ineffective, a de novo preparation of the PSLRA safe harbor language for each instance is neither feasible nor sensible. Instead, issuers should develop at least one adaptable template for any oral or written forward-looking statements and edit it as necessary to fit the circumstances. Different formats might necessitate slight modifications to comply with the safe harbor requirements. Therefore, it is advisable to prepare templates for:

• periodic filings (easily adjustable into a prospectus-related template);
• press releases;
• social media posts; and
• oral presentations.

In special circumstances, such as a registration statement in connection with a merger and the corollary Rule 425 filings, additional tailored templates may be necessary.

Avoiding misuse of the PSLRA safe harbor legend

While it might seem straightforward, it is crucial to avoid the inclusion of the PSLRA safe harbor language in documents or oral presentations that do not contain forward-looking statements. This practice, though it may not directly affect the specific document, can lead to allegations that the issuer is not meaningfully employing the PSLRA safe harbor, thus potentially exposing unrelated statements to vulnerability under "boilerplate" attacks.

Identifying Forward-Looking Statements

The key issue in identifying forward-looking statements in a document or oral speech with the intent of ensuring PSLRA protection is whether the boilerplate-esque disclosures such as "all statements, other than statements of historical facts are forward-looking statements" and "you can identify forward-looking statements by the use of words such as 'may,' 'will,' 'expect,' 'anticipate,' 'estimate,' 'believe,' 'continue,' or other similar words" are sufficient to meet the statutory requirements. While specific facts and circumstances (including different SEC forms) of each disclosure can influence this determination, some general guidance can be offered.

Examples of forward-looking words and phrases are a better approach than a negative definition

Purported identification of forward-looking statements by means of a negative definition (i.e., stating the forward-looking statements are statements other than "the statements of historical fact") may not be optimal. This method places the burden of identification on investors and, therefore, appears to be inconsistent with the statutory intention of presenting investors with meaningful information.

Listing examples of words and phrases typically used in forward-looking statements is usually sufficient for periodic reports and registration statements. Based on the SEC's stance expressed in its amicus curiae brief submitted in Slayton v. American Express Co.,^[28] a disclaimer stating that "[t]he words 'believe', 'expect', 'anticipate', 'optimistic', 'intend', 'aim', 'will', 'should' and similar expressions are intended to identify such forward-looking statements" is typically enough to meet the statutory requirement. Issuers should remember that forward-looking statements may be identified by a variety of words and expressions, including such terms as "on track," "target," "forecast," "future," "upcoming," and many other, similar expressions, leading to an extensive and potentially cumbersome list of examples. Being overinclusive, however, is not problematic in this context.

Consider increased specificity in certain circumstances

A thorough list of keywords should be sufficient for the purpose of prospectuses, where identification of each forward-looking statement is impractical. In the context of periodic reports on Forms 10-K and 10-Q, such lists may be additionally "strengthened" by the identification of items of the periodic reports where forward-looking statements are most likely located (business, MD&A, legal proceedings, disclosure controls and procedures).

For press releases, current reports on Form 8-K, and similar documents with disclosures focused on an event or a topic, adding a specific sentence to identify particular forward-looking statements or their categories is prudent. For example: "This press release contains forward-looking statements relating to, among other things, the stages of the development of our new technology." This practice is also advisable for oral presentations, where identifying forward-looking statements can be more challenging for investors.

Identifying Important Factors

The second requirement of the PSLRA legend is to meaningfully convey information about factors that could cause actual results to differ from those projected. The starting point is usually the issuer's risk factors.^[29] The key question is whether the cautionary statement needs to represent all important factors or emphasize those most likely to impact actual results. Ironically, case law, on the one hand, suggests that including the entirety of the risks possibly affecting the company makes the cautionary language so general as not to be meaningful^[30] but, on the other hand, indicates the importance of referencing all factors that subsequently caused the issuer's forward-looking statements not to come to fruition,^[31] thereby tempting the drafter to reference as many risk factors as possible. It is still possible to focus the reader's attention on the most relevant risks without jeopardizing the protection of the PSLRA safe harbor. For example, the forward-looking disclosure on Form 8-K limited to the timing of a merger should include risks related to the closing conditions (such as the ability to obtain in a timely manner regulatory approvals, stockholders' approvals, the ability to maintain a required cash balance, etc.), but should not include the risks about the post-merger company (such as synergy and post-merger lawsuits), because such risks would not be apposite to the forward-looking statements.

Provide an extensive list of risks with a focus on company-specific and event-specific risks

Analogously to the identification of forward-looking statements, the approach to the identification of important risks should be determined by the type of filing or the format of the document or speech. For broad-scope documents like prospectuses and periodic filings, reference to most, if not all, relevant risk factors as bullet points seems appropriate, if not necessary. However, for more focused communications like press releases or oral statements on specific topics, listing every possible risk factor relevant to the issuer's business could make the cautionary language too generic, and therefore ineffective. Emphasis should be placed on warnings that pertain to the issuer and the event in question.^[32] For example, a press release about a merger should highlight risks directly related to the transaction, rather than an exhaustive list of all potential risks: "extreme weather conditions" should likely not be among the risks pertaining to the consummation of a merger. Additionally, "identifying important risks" does not necessarily mean copying and pasting the titles of all risk factors to the safe harbor legend: concise language is much more meaningful and user-friendly.

Combine incorporation by reference and the disclosure of the most important risks

In the case of oral forward-looking statements, the PSLRA provides that reference to a readily available written document containing the risks is appropriate, but it does not explicitly address written statements. Referencing periodic filings in the PSLRA safe harbor for written forward-looking statements is expressly permitted in at least one circuit.^[33] Although we wholeheartedly agree with such a position, it appears advisable to include the most critical risks directly in the cautionary statement legend and refer to less significant risk factors contained in the issuer's periodic reports (which is exactly what the issuer in the cited case did).

Update in a timely manner important risks when circumstances change

The efficacy of templates is essential for ensuring that forward-looking statements are protected under the PSLRA. However, lessons learned from case law^[34] emphasize the importance of updating the cautionary language with changing circumstances, particularly concerning the risks referenced. Specifically, risks identified in the cautionary language must be current, accurate, and relevant. For instance, following the development of a customized template for Rule 425 filings in connection with a merger, it is vital to regularly revise and update such template: once certain approvals have been received, the risk associated with the failure to receive these approvals should no longer be included in subsequent Rule 425 filings.

Misleading cautionary statements are never meaningful

The SEC^[35] and courts^[36] have consistently highlighted that cautionary language describing risks must not present known events as hypothetical: when risks already realized are described as merely potential risks, such misrepresentation renders the cautionary statement under the PSLRA meaningless.^[37] Doing this may disqualify the PSLRA language as not meaningful. For example, in the context of a merger agreement, an issuer's reference to potential defaults under existing loan agreements, if the issuer is aware that entering into the merger has led to actual defaults on those loans, renders the safe harbor legend meaningless and may render the PSLRA insulation unavailable.

Other Considerations

No need to isolate forward-looking statements from present-tense narratives, but intentional mixing will not alter the nature of statements either

The decisions in Wochos v. Tesla, Inc.^[38] and In re Quality Systems, Inc. Securities Litigation^[39] emphasize that the PSLRA does not require a clear-cut separation between forward-looking statements and those relating to current or past events in order to shield the forward-looking statements from liability; conversely, statements about the future can involve both non-actionable forward-looking elements and potentially actionable non-forward-looking components. Notably, these and other cases also confirm that the classification of a statement as "forward-looking" is based on its substance and not merely on its tense.^[40] Thus, the reaffirmation of future objectives, even when articulated in the present tense, remains protected as a forward-looking statement under the PSLRA. Even if intertwined with a protected forward-looking statement, an inaccurate or misleading statement of historical fact remains actionable.^[41]

The location of the PSLRA legend can be accommodated to preferences

A board of directors frequently has a preference as to where to locate the cautionary language in periodic filings. For example, there is a point of view that cautionary language should be a standalone item, should not be included within MD&A, and should be located at the front of a periodic report so as "not to distract the investors" from reading the "body" of a periodic report. Any such preference of the board of directors can be accommodated without the danger of jeopardizing the safe harbor, and the placement of the PSLRA safe harbor to the front of the periodic report or immediately preceding MD&A are both viable. We would caution, however, against placement of the PSLRA safe harbor language in the "back of the book" or in another unusual location, as one may argue that such placement may render the safe harbor language not meaningful.

Hyperlink the legend if the media does not permit its inclusion

When social media platforms or other media limit the number of symbols or otherwise render the inclusion of a PSLRA safe harbor legend impossible or impractical, the legend should be prominently provided through an active hyperlink. Although this practice has not been expressly blessed by the SEC, we do not see the reason why the SEC would oppose this, especially considering the analogous approach permitted with Rule 134 legends.^[42] While the legend can be included in a series of sequential posts (for instance, on X), a hyperlink will better ensure that the legend will be attached to the statement in case of reposting or other dissemination, which will not be the case with sequential messages. Issuers may choose to combine both methods—sequential messaging and hyperlinks—if they find it does not compromise the aesthetic qualities of the message.

SAFE Harbor Language for Oral Statements

When dealing with speeches and other oral communications—scripted and unscripted—that include forward-looking statements, additional considerations must be taken into account to ensure compliance with the PSLRA safe harbor requirements.

Covered speakers do not include underwriters

For oral statements, the PSLRA safe harbor protection is intentionally^[43] limited to statements made by the issuer or a person acting on the issuer's behalf, and statements made by underwriters on behalf of the issuer are not covered by the PSLRA safe harbor.

Statement about the document with additional information must accompany oral forward-looking statement

In addition to the identification of particular forward-looking statements and the risks associated therewith (which is a requirement for both oral and written statements), oral forward-looking statement legends must include a statement that additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statement is contained in a readily available written document, and such document must be identified. This requirement suggests that even if a speech is not scripted, the PSLRA oral legend should be (unless there is absolute confidence in the speaker's ability to recall and articulate all required disclosures accurately).

Format and timing of the PSLRA legend may potentially render the legend meaningless

Logistical planning for announcing PSLRA legends is essential. For instance, if forward-looking statements are intended only for a Q&A session following a formal adjournment of an annual meeting, it may be inappropriate to announce the safe harbor legend before the meeting begins or state in such legend that oral forward-looking statements will take place during the annual meeting. Additionally, for unscripted speeches, clearly defining the topics to be discussed beforehand allows for the crafting of the safe harbor language in a meaningful way, ensuring the legend identifies relevant risks without being overly broad or generic.

Footnotes

[1] 17 C.F.R. §229.10(b) (2024), available here.

[2] Securities Litigation Reform Act, H.R. Rep No. 104-369, at 32 (1995) (Conf. Rep.), available here.

[3] 17 C.F.R. § 230.175 (2024), available here.

[4] 17 C.F.R. § 240.3b-6 (2024), available here.

[5] 15 U.S.C. § 77z-2, available here.

[6] 15 U.S.C. § 78u-5, available here.

[7] Securities Litigation Reform Act, H.R. Rep. No. 104-369, at 46 (1995) (Conf. Rep.), available here.

[8] The final rules (relating to the offering of securities by special purpose acquisition companies (SPACs)) are available here.

[9] 15 U.S.C.A. § 77z-2(c)(1); 15 U.S.C.A. § 78u-5(c)(1).

[10] See generally Ocampo v. Williams, No. 21-CIV-03843, slip op. at 9 (San Mateo Cal. Super. Ct. July 25, 2022; Louis Loss, Joel Seligman & Troy Paredes, Securities Regulation 11.D.4, fn. 530 (6th ed. 2021).

[11] A "bad actor" for PSLRA purposes means any issuer who, within the 3-year period prior to making the forward-looking statement, was convicted of any felony or misdemeanor described in 15 U.S.C.A. § 78o-(b)(4)(B) or was the subject of a judicial or administrative decree or order arising out of a governmental action (i) prohibiting future violations of the antifraud provisions of the securities laws, (ii) requiring that the issuer cease and desist from violating the antifraud provisions of the securities laws, or (iii) determining that the issuer violated the antifraud provisions of the securities laws.

[12] This term now includes SPACs solely for the purposes of the PSLRA due to the amendments to Securities Act Rule 405 and Exchange Act Rule 12b-2 made by the SEC as a part of "new rules and amendments to enhance disclosures and provide additional investor protection in initial public offerings by special purpose acquisition companies" adopted on January 24, 2024 and effective as of July 1, 2024. The final rules are available here. As the SEC stated the purpose of such amendments as to align the IPOs and de-SPAC business combinations, the amendment impacts solely de-SPAC transactions. Post de-SPAC companies will not be impacted by the amended rules.

[13] Which means that issuers should take care to locate forward-looking statements in MD&A rather than notes to financial statements, and when, as is common, similar disclosure is contained in both MD&A and financial statements notes, to remove any forward-looking statements from the notes.

[14] We do not believe that it would be proper to convey any statement with knowledge that such statement is false or misleading; however, the plain language of the statute, as well as interpretation by courts, is unambiguous with regard to the prongs: either of them would technically suffice to shield a forward-looking statement. See Wochos v. Tesla, Inc., 985 F.3d 1180, 1190 (9th Cir. 2021) ("As we explained in Quality Systems, the use of the disjunctive term 'or' between subclauses (A) and (B) confirms that 'a defendant will not be liable for a false or misleading statement if it is forward-looking and either is accompanied by cautionary language or is made without actual knowledge that it is false or misleading.'") (emphasis in original).

[15] The PSLRA is frequently called the "codified" bespeaks caution doctrine.

[16] See Harold S. Bloomenthal & Samuel Wolff, Securities and Federal Corporate Law § 15:32 (2d ed. 2023).

[17] See id. § 15:30.

[18] See Thomas Lee Hazen, Treatise on the Law of Securities Regulation § 12:73 (2d ed. 2023).

[19] See Lloyd v. CVB Fin. Corp., 811 F.3d 1200, 1207 (9th Cir. 2016) ("vague, optimistic statements by [the company's] officials are not actionable.").

[20] Robeco Cap. Growth Funds SICAV - Robeco Glob. Consumer Trends v. Peloton Interactive, Inc., 665 F. Supp. 3d 522, 540 (S.D.N.Y. 2023).

[21] See, e.g., Yan v. ReWalk Robotics Ltd., 973 F.3d 22, 33 (1st Cir. 2020) (the court concluded that "the word 'breakthrough' is simply a puffed-up qualitative expression of the product's novelty").

[22] In re Razorfish, Inc. Sec. Litig., No. 00 CIV. 9474 (JSR), 2001 WL 1111502, at *3 (S.D.N.Y. Sept. 21, 2001).

[23] See § 28:22. Puffery post-PSLRA, 2 Sec. Law Handbook § 28:22 ("many courts think they can (and sometimes they can) recognize puffery when they see it").

[24] Robeco Cap. Growth Funds SICAV - Robeco Glob. Consumer Trends v. Peloton Interactive, Inc., 665 F. Supp. 3d 522, 540 (S.D.N.Y. 2023)

[25] See 17 CFR 229.10, available here.

[26] If explicit reference to the PSLRA is inadvertently included, the issuer will likely receive the following comment from the SEC: "Section 27A(b)(2)(D) of the Securities Act of 1933 and Section 21E(b)(2)(D) of the Securities Exchange Act of 1934 expressly state that the safe harbor for forward-looking statements does not apply to statements made in connection with an initial public offering. Please either delete any reference to the Private Securities Litigation Reform Act, or make clear each time you refer to the Private Securities Litigation Reform Act that the safe harbor does not apply to initial public offerings."

[27] See Securities Litigation Reform Act, H.R. Rep No. 104-369, at. 43 (1995) (Conf. Rep.), available here:

The first prong of the safe harbor protects a written or oral forward-looking statement that is: (i) identified as forward-looking, and (ii) accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in the statement. "Under this first prong of the safe harbor, boilerplate warnings will not suffice as meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in the statement. The cautionary statements must convey substantive information about factors that realistically could cause results to differ materially from those projected in the forward-looking statement, such as, for example, information about the issuer's business. As part of the analysis of what constitutes a meaningful cautionary statement, courts should consider the factors identified in the statements. "Important" factors mean the stated factors identified in the cautionary statement must be relevant to the projection and must be of a nature that the factor or factors could actually affect whether the forward-looking statement is realized.

[28] Slayton v. Am. Exp. Co., 604 F.3d 758 (2d Cir. 2010).

[29] The PSLRA mandates the identification of the risks that may cause forward-looking statements not to come to fruition. This is technically a concept that is distinct from "risk factors," material factors that make an investment in the registrant or offering speculative or risky. See 17 C.F.R. §229.106 (2020), available here. In the context of drafting the PSLRA safe harbor legend, distinguishing between these two concepts seems overly metaphysical and perhaps unnecessary. Nonetheless, it is important to recognize that not all risk factors applicable to a company's business as a whole may be relevant to the specific forward-looking statements. Therefore, a listing of all risk factors should be reviewed, and most likely trimmed, with this in mind.

[30] Southland Secs. Corp. v. INSpire Ins. Sols., Inc., 365 F.3d 353, 372 (5th Cir. 2004) ("The requirement for 'meaningful' cautions calls for 'substantive' company-specific warnings based on a realistic description of the risks applicable to the particular circumstances, not merely a boilerplate litany of generally applicable risk factors."); Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 244–48 (5th Cir. 2009).

[31] Lopez v. CTPartners Executive Search Inc., 173 F. Supp. 3d 12, 25 (S.D.N.Y. 2016) ("Plaintiffs may establish that cautionary language is not meaningful 'by showing, for example, that the cautionary language did not expressly warn of or did not directly relate to the risk that brought about plaintiffs' loss.'") (internal citation omitted); In re Weight Watchers Int'l Inc. Sec. Litig., 504 F. Supp. 3d 224, 253 (S.D.N.Y. 2020).

[32] This language must be both "extensive and specific" and must contain "substantive company-specific warnings." Gray v. Wesco Aircraft Holdings, Inc., 454 F. Supp. 3d 366, 392 (S.D.N.Y. 2020) (internal quotations and citations omitted). See also Gluck v. Hecla Mining Co., 657 F. Supp.3d 471, 485 (S.D.N.Y. 2023) ("These warnings, when read together, caution investors of the very risks that Plaintiffs allege ultimately occurred—namely that the Nevada Mines were not in the condition they were initially thought to be and that the cost of operating those mines would ultimately be higher than expected.").

[33] In re Odyssey Healthcare, Inc. Sec. Litig., 424 F.Supp.2d 880, 886 (N.D. Tex. 2005).

[34] In Sgalambo v. McKenzie, 739 F. Supp. 2d 453, 478 (S.D.N.Y. 2010), the court disfavored the "disclaimer appended to every [issuer] statement issued during the Class Period" because although "this disclaimer mentioned myriad, general factors—such as natural gas prices or environmental hazards—that might cause actual results to differ from [the issuer's] projections, the disclaimer provided no company-specific information, failed to link any specific projections to specific risks, and remained constant throughout the Class Period, even as the risks confronting [the issuer] changed."

[35] See Brief for the SEC as Amicus Curiae, Slayton v. Am. Exp. Co., 604 F.3d 758 (2d Cir. 2010), available here.

[36] Wang v. Cloopen Grp. Holding Ltd., 661 F.Supp.3d 208, 230 (S.D.N.Y. 2023) ("the lead plaintiff adequately alleges that the [issuer's] warnings regarding the future risk of declining customer retention were misleading, in view of the then-existing but omitted fact of the steep 4Q 2020 decline in the net customer retention rate.").

[37] The requirement for risk factors is identical—one more reason to treat risk factors and risks in the PSLRA legend in a similar manner for drafting purposes.

[38] Wochos v. Tesla, Inc., 985 F.3d 1180 (9th Cir. 2021).

[39] In re Quality Sys., Inc. Sec. Litig., 865 F.3d 1130 (9th Cir. 2017).

[40] See Jaeger v. Zillow Grp., Inc., 644 F. Supp. 3d 857, 869 (W.D. Wash. 2022) ("To fall under the PSLRA's safe harbor, the statement must be forward-looking in substance, not merely in form").

[41] In re Quality Sys., Inc. Sec. Litig., 865 F.3d at 1141 ("We hold a defendant may not transform non-forward-looking statements into forward-looking statements that are protected by the safe harbor provisions of the PSLRA by combining non-forward-looking statements about past or current facts with forward-looking statements about projected revenues and earnings.").

[42] See Securities Act Rules C&DI 110.01, available here.

[43] http://www.gpo.gov/fdsys/pkg/CRPT-104hrpt369/pdf/CRPT-104hrpt369.pdf