In his remarks last week announcing the issuance of proposed amendments to MD&A disclosure and disclosure guidance (covered in the February 5th Society Alert), SEC Chair Clayton briefly addressed the evolving Coronavirus risk:
Yesterday, I asked the staff to monitor and, to the extent necessary or appropriate, provide guidance and other assistance to issuers and other market participants regarding disclosures related to the current and potential effects of the coronavirus. We recognize that such effects may be difficult to assess or predict with meaningful precision both generally and as an industry- or issuer-specific basis. This is an uncertain issue where actual effects will depend on many factors beyond the control and knowledge of issuers. However, how issuers plan for that uncertainty and how they choose to respond to events as they unfold can nevertheless be material to an investment decision.
Members seeking illustrative disclosures may wish to review Starbucks' Form 10-Q filed January 28 - which noted the coronavirus and the anticipated impacts on its financial results as a "Subsequent Event," Levi Strauss & Co.'s Form 10-K filed January 30th, which referenced the virus in a broader "events outside of our control" Risk Factor, and Royal Caribbean Cruises' Form 8-K and earnings release filed and issued (respectively) yesterday. Intelligize notes these additional disclosures: Unilever Form 6-K, Tata Motors Form 6-K, Cree Inc. Form 10-Q, Vir Biotechnology, Inc. Form 8-K, Ocean Bio-Chem Form 8-K and press release, and AlphaProTech Form 8-K and press release.
Weil offers this guidance:
Reporting companies have a duty to ascertain and disclose the outbreak’s impact on their businesses, if material. Coronavirus-related disclosures may be required in, among others, the Business, Risk Factors, and MD&A sections of SEC filings. MD&A requires companies to consider and disclose certain known trends and uncertainties. Even if a company’s risk factor already states that its business may be adversely and materially affected by outbreaks of diseases, the company would need to consider updating the risk factor if the impact of the coronavirus is no longer just a hypothetical one.
See also BlackRock's market commentary, Corporate Counsel's "China's Coronavirus Pushes In-House Teams Into Crisis Management Mode," and the WSJ's "How Coronavirus Could Disrupt the Auditing of Companies" and "Royal Caribbean Expects Coronavirus to Weigh on China Sales." This post first appeared in this week's Society Alert!