In order to make smart decisions, investors must have all material information available. Even overlooking one seemingly minor detail regarding a company’s health can lead to disastrous losses for an investor. If this occurs as a result of the investor’s error or carelessness, then the mistake is ultimately his or hers to own.
However, sometimes corporations hold back relevant information, leaving investors with an incomplete, overly optimistic understanding of the company’s current situation. Such inadequate disclosures are a violation of federal securities law, which means they’re open to being investigated by the Securities and Exchange Commission.
As a whistleblower, you stand to be financially rewarded if the SEC recovers over $1,000,000 in sanctions from their investigation. With that in mind, it pays to be aware of the most common examples of inadequate corporate disclosures.
Inadequate Financial Disclosures
By far, the most common type of inadequate disclosure takes the form of incomplete or falsified financial documents. These could be accounting records, or they might be financial reports that are filed with the SEC and other regulatory bodies. Inadequate financial disclosures might even be reported to investors, hiding quarterly losses or reporting much larger profits than there actually were.
This sort of false reporting can obviously put investors at substantial risk. Unsuspecting individuals could easily sink thousands of dollars into a company, never realizing that the company is on the brink of financial ruin.
Reckless Business Practices
Another form of inadequate disclosure can occur when a corporation does not fully disclose its business strategy or methods to its investors. If the investors are led to believe that the company is taking a low-risk approach to business when in fact there is a great deal of risk involved, the misinformation can lead to substantial—and surprising—financial losses if the risks don’t pan out as hoped.
Corporate Cover-Ups and Conflicts of Interest
Sometimes businesses also hide personal misconduct or conflicts of interest from their investors. The investors will be expecting the company to always act within its own best interests. However, if a company executive has a conflicting interest, such as a romantic or familial connection to a separate business interest, the executive might instead act to protect that interest at the expense of the company’s.
This is a withheld disclosure that the investors should have been made aware of, as it is material information impacting the company’s potential decisions and performance.
Help from a Whistleblower Attorney
Meissner Associates can help you become an SEC whistleblower and expose an inadequate disclosure—whether that disclosure is financial or otherwise. For more information, contact our office for a free, confidential tip evaluation. Just complete the form at the bottom of this page or call 1-866-764-3100 today.