Companies Often Tread Gray Area With SEC Disclosures

July 9, 2015 – In The News
Pittsburgh Post-Gazette

Ernest Badway was quoted in the Pittsburgh Post-Gazette article, “Companies Often Tread Gray Area With SEC Disclosures.” Full text can be found in the July 9, 2015, issue, but a synopsis is below.

According to securities lawyers, federal securities regulations governing the disclosure of transactions often leave ample room for interpretation about which business deals need to be reported.

In an effort to protect investors, the U.S. Securities and Exchange Commission requires organizations to disclose certain transactions involving individuals with close ties to the company.

“Related-party transactions are always problematic because of the nature of the conflict of interest,” said Ernest Badway. “The SEC is always about that because of what could happen.”

According to Badway, the “vast majority” of transactions involving company officers, directors and their family are beneficial to shareholders.

Companies are required to disclose transactions in excess of $120,000, but do not need to report deals above that threshold if, in their judgment, the transaction is not material, Badway said.

For Badway, he said he “always errs on the side of disclosure” when counseling clients. “You can never be faulted by a government regulator for disclosing something truthfully,” he said.