CITE

    15 USC Sec. 78u-5                                           01/08/2008

EXPCITE

    TITLE 15 - COMMERCE AND TRADE
    CHAPTER 2B - SECURITIES EXCHANGES

HEAD

    Sec. 78u-5. Application of safe harbor for forward-looking
      statements

STATUTE

    (a) Applicability
      This section shall apply only to a forward-looking statement made
    by -
        (1) an issuer that, at the time that the statement is made, is
      subject to the reporting requirements of section 78m(a) of this
      title or section 78o(d) of this title;
        (2) a person acting on behalf of such issuer;
        (3) an outside reviewer retained by such issuer making a
      statement on behalf of such issuer; or
        (4) an underwriter, with respect to information provided by
      such issuer or information derived from information provided by
      such issuer.
    (b) Exclusions
      Except to the extent otherwise specifically provided by rule,
    regulation, or order of the Commission, this section shall not
    apply to a forward-looking statement -
        (1) that is made with respect to the business or operations of
      the issuer, if the issuer -
          (A) during the 3-year period preceding the date on which the
        statement was first made -
            (i) was convicted of any felony or misdemeanor described in
          clauses (i) through (iv) of section 78o(b)(4)(B) of this
          title; or
            (ii) has been made the subject of a judicial or
          administrative decree or order arising out of a governmental
          action that -
              (I) prohibits future violations of the antifraud
            provisions of the securities laws;
              (II) requires that the issuer cease and desist from
            violating the antifraud provisions of the securities laws;
            or
              (III) determines that the issuer violated the antifraud
            provisions of the securities laws;
          (B) makes the forward-looking statement in connection with an
        offering of securities by a blank check company;
          (C) issues penny stock;
          (D) makes the forward-looking statement in connection with a
        rollup transaction; or
          (E) makes the forward-looking statement in connection with a
        going private transaction; or
        (2) that is -
          (A) included in a financial statement prepared in accordance
        with generally accepted accounting principles;
          (B) contained in a registration statement of, or otherwise
        issued by, an investment company;
          (C) made in connection with a tender offer;
          (D) made in connection with an initial public offering;
          (E) made in connection with an offering by, or relating to
        the operations of, a partnership, limited liability company, or
        a direct participation investment program; or
          (F) made in a disclosure of beneficial ownership in a report
        required to be filed with the Commission pursuant to section
        78m(d) of this title.
    (c) Safe harbor
      (1) In general
        Except as provided in subsection (b) of this section, in any
      private action arising under this chapter that is based on an
      untrue statement of a material fact or omission of a material
      fact necessary to make the statement not misleading, a person
      referred to in subsection (a) of this section shall not be liable
      with respect to any forward-looking statement, whether written or
      oral, if and to the extent that -
          (A) the forward-looking statement is -
            (i) identified as a forward-looking statement, and is
          accompanied by meaningful cautionary statements identifying
          important factors that could cause actual results to differ
          materially from those in the forward-looking statement; or
            (ii) immaterial; or
          (B) the plaintiff fails to prove that the forward-looking
        statement -
            (i) if made by a natural person, was made with actual
          knowledge by that person that the statement was false or
          misleading; or
            (ii) if made by a business entity; (!1) was -
              (I) made by or with the approval of an executive officer
            of that entity; and
              (II) made or approved by such officer with actual
            knowledge by that officer that the statement was false or
            misleading.
      (2) Oral forward-looking statements
        In the case of an oral forward-looking statement made by an
      issuer that is subject to the reporting requirements of section
      78m(a) of this title or section 78o(d) of this title, or by a
      person acting on behalf of such issuer, the requirement set forth
      in paragraph (1)(A) shall be deemed to be satisfied -
          (A) if the oral forward-looking statement is accompanied by a
        cautionary statement -
            (i) that the particular oral statement is a forward-looking
          statement; and
            (ii) that the actual results might differ materially from
          those projected in the forward-looking statement; and
          (B) if -
            (i) the oral forward-looking statement is accompanied by an
          oral statement that additional information concerning factors
          that could cause actual results to materially differ from
          those in the forward-looking statement is contained in a
          readily available written document, or portion thereof;
            (ii) the accompanying oral statement referred to in clause
          (i) identifies the document, or portion thereof, that
          contains the additional information about those factors
          relating to the forward-looking statement; and
            (iii) the information contained in that written document is
          a cautionary statement that satisfies the standard
          established in paragraph (1)(A).
      (3) Availability
        Any document filed with the Commission or generally
      disseminated shall be deemed to be readily available for purposes
      of paragraph (2).
      (4) Effect on other safe harbors
        The exemption provided for in paragraph (1) shall be in
      addition to any exemption that the Commission may establish by
      rule or regulation under subsection (g) of this section.
    (d) Duty to update
      Nothing in this section shall impose upon any person a duty to
    update a forward-looking statement.
    (e) Dispositive motion
      On any motion to dismiss based upon subsection (c)(1) of this
    section, the court shall consider any statement cited in the
    complaint and any cautionary statement accompanying the forward-
    looking statement, which are not subject to material dispute,
    cited by the defendant.
    (f) Stay pending decision on motion
      In any private action arising under this chapter, the court shall
    stay discovery (other than discovery that is specifically directed
    to the applicability of the exemption provided for in this section)
    during the pendency of any motion by a defendant for summary
    judgment that is based on the grounds that -
        (1) the statement or omission upon which the complaint is based
      is a forward-looking statement within the meaning of this
      section; and
        (2) the exemption provided for in this section precludes a
      claim for relief.
    (g) Exemption authority
      In addition to the exemptions provided for in this section, the
    Commission may, by rule or regulation, provide exemptions from or
    under any provision of this chapter, including with respect to
    liability that is based on a statement or that is based on
    projections or other forward-looking information, if and to the
    extent that any such exemption is consistent with the public
    interest and the protection of investors, as determined by the
    Commission.
    (h) Effect on other authority of Commission
      Nothing in this section limits, either expressly or by
    implication, the authority of the Commission to exercise similar
    authority or to adopt similar rules and regulations with respect to
    forward-looking statements under any other statute under which the
    Commission exercises rulemaking authority.
    (i) Definitions
      For purposes of this section, the following definitions shall
    apply:
      (1) Forward-looking statement
        The term "forward-looking statement" means -
          (A) a statement containing a projection of revenues, income
        (including income loss), earnings (including earnings loss) per
        share, capital expenditures, dividends, capital structure, or
        other financial items;
          (B) a statement of the plans and objectives of management for
        future operations, including plans or objectives relating to
        the products or services of the issuer;
          (C) a statement of future economic performance, including any
        such statement contained in a discussion and analysis of
        financial condition by the management or in the results of
        operations included pursuant to the rules and regulations of
        the Commission;
          (D) any statement of the assumptions underlying or relating
        to any statement described in subparagraph (A), (B), or (C);
          (E) any report issued by an outside reviewer retained by an
        issuer, to the extent that the report assesses a forward-
        looking statement made by the issuer; or
          (F) a statement containing a projection or estimate of such
        other items as may be specified by rule or regulation of the
        Commission.
      (2) Investment company
        The term "investment company" has the same meaning as in
      section 80a-3(a) of this title.
      (3) Going private transaction
        The term "going private transaction" has the meaning given that
      term under the rules or regulations of the Commission issued
      pursuant to section 78m(e) of this title.
      (4) Person acting on behalf of an issuer
        The term "person acting on behalf of an issuer" means any
      officer, director, or employee of such issuer.
      (5) Other terms
        The terms "blank check company", "rollup transaction",
      "partnership", "limited liability company", "executive officer of
      an entity" and "direct participation investment program", have
      the meanings given those terms by rule or regulation of the
      Commission.

SOURCE

    (June 6, 1934, ch. 404, title I, Sec. 21E, as added Pub. L. 104-67,
    title I, Sec. 102(b), Dec. 22, 1995, 109 Stat. 753.)

REFERENCES IN TEXT

      This chapter, referred to in subsecs. (c)(1), (f), and (g), was
    in the original "this title". See References in Text note set out
    under section 78a of this title.

EFFECTIVE DATE

      This section not to affect or apply to any private action arising
    under this chapter or title I of the Securities Act of 1933 (15
    U.S.C. 77a et seq.), commenced before and pending on Dec. 22, 1995,
    see section 108 of Pub. L. 104-67, set out as an Effective Date of
    1995 Amendment note under section 77l of this title.
                               CONSTRUCTION
      Nothing in section to be deemed to create or ratify any implied
    right of action, or to prevent Commission, by rule or regulation,
    from restricting or otherwise regulating private actions under this
    chapter, see section 203 of Pub. L. 104-67, set out as a note under
    section 78j-1 of this title.

FOOTNOTE

    (!1) So in original. The semicolon probably should be a comma.