Managers' Lives More Difficult after Supreme Court Decisions

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significantly the obligations of public companies and their managers to disclose preliminary merger negotiations to the public.

It also has adopted a rule already applied by most lower courts - the "fraud-on-the-market theory" - that makes it far easier for plaintiffs who bring suits for securities fraud to prove their losses were caused by misleading statements made by defendants.

Under this theory, the court said that investors who traded in a company's stock at a time that the market price had been distorted by false statements made by the company could be presumed to have been defrauded if they lost money because of that distortion.

Experts in securities law on both sides of the case said the decision would make the lives of managers more difficult by forcing them to make judgment calls about whether to disclose preliminary merger negotiations and other significant transactions in the planning stage.

If the managers made misleading denials or incomplete statements about such talks, they could face legal liability; if they provided reasonably full disclosure, they could risk jeopardizing the deal.

"I definitely agree with the concept and it certainly gives a course of recovery when there's fraud-on-the-market," said Susan Bryant, administrator of the Oklahoma Securities Commission.

"The question," she said, "is at what point do they have to disclose? I don't know how far they've gone, but it's certainly interesting to see that."

Bryant said she felt as though a company should disclose potential merger talks "as soon as they have a commitment to go forward" so that the idea of all shareholders having equal access to that information" becomes somewhat of a reality.

"Some companies would not disclose anthing," Bryant said, because the officials said "it would jeapordize the entire deal.

"But the other position is that once there is anything more than just talk, it should be disclosed," Bryant said.

Another Oklahoma City executive who was intimately involved in merger negotiations between Oklahoma City-based USPCI Inc. and the Union Pacific Corp. was Larry Shelton, Executive Vice President-Finance for USPCI.

Shelton said his company took a conservative approach to dealing with the press and the statements they made, saying:

"We issued a press release and gave out all the facts and did not comment except for what was in the press release. …