Dismissed Charges
Although the judge ordered that the securities fraud charge proceed to trial, he dismissed all of the other charges. Those charges included the SEC’s argument that security misrepresentations amount to accounting errors, and that statements made in news releases and blogs also fooled investors.
Dismissed Charges Explanation
Engelmayer dismissed public statements by Brown, including those in company-approved press releases, blog posts, and podcasts, “because each qualifies as non-actionable corporate puffery, too general to cause a reasonable investor to rely upon them.”
Analysis of Judge’s Ruling
The judge said that when the SEC faulted the public disclosures, it “means to fault SolarWinds for not spelling out these risks in greater detail.” But, the judge wrote, “the case law does not require more” and specifically does not require “that the company set out in substantially more specific terms scenarios under which its cybersecurity measures could prove inadequate. As decisions in this District have recognized, the anti-fraud laws do not require cautions to be articulated with maximum specificity.”
Conclusion
From the judge’s ruling, it is clear that SolarWinds’ public statements, despite being criticized by the SEC, are deemed non-actionable as they are too general and cannot be relied upon by investors. Additionally, the judge has ruled that the case law does not require companies to provide detailed specific risks in their public disclosures, as this would be an excessive burden on corporations.
Frequently Asked Questions
Q: What did the judge order with regards to the securities fraud charge?
A: The judge ordered that the securities fraud charge proceed to trial.
Q: What charges were dismissed by the judge?
A: The judge dismissed all of the other charges, including the SEC’s argument that security misrepresentations amount to accounting errors, and that statements made in news releases and blogs also fooled investors.
Q: Why did the judge dismiss the public statements by Brown?
A: The judge dismissed the public statements because they “qualify as non-actionable corporate puffery, too general to cause a reasonable investor to rely upon them.”
Q: What does the judge’s ruling say about the requirement for public disclosures?
A: According to the judge, the case law does not require companies to provide detailed specific risks in their public disclosures, as this would be an excessive burden on corporations.
