Minimize Securities Litigation Risks: Guidelines For Designing Your Web Site

With the widespread interest in the World Wide Web, many firms are developing company-specific web sites to promote their products and services. These web sites may include, for example, marketing information, anticipated product introductions, public documents, and financial results. Because of the depth of information contained on a web site, and because much of that information may be considered forward-looking, web sites may become potential gold mines for securities class action plaintiffs.
To minimize the securities litigation risks attending firm-specific web sites, the following steps should be taken.

1. Safe Harbor Language. First, and most importantly, the web site should include language sufficient to invoke the Reform Act's safe harbor for forward-looking statements. ¹ We recommend that the following safe harbor language be placed on the Home Page and in any other web site segment — such as marketing or product introductions — that contains forward-looking statements:

   Some of the information on this web site may contain projections or other forward-looking statements regarding future events or the future financial performance of the Company. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We refer you to the documents the Company files from time to time with the Securities and Exchange Commission, specifically, the Company's most recent Form 10-K and Form 10-Q. These documents contain and identify important factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements.

   See InsiteVision and Atlantic Pharmaceuticals, Inc.

2. Form 10-Ks and Form 10-Qs on the Web Site. The Company should place its most recent Form 10-K and Form 10-Q on the web site. Ideally, the Company should include a "link" from the safe harbor language to the Company's risk factor disclosures. The risk factors contained in these documents should be reviewed and updated on a quarterly basis, and the most recent Form 10-K and Form 10-Q should be placed on the web site as soon as they become available. By including these documents and the risk factors contained in them on the web site, the Company has essentially republished its most current risk factor disclosures to all web browsers, which will heighten the Company's ability to invoke the Bespeaks Caution doctrine in the event it is sued for statements contained on its web site.
3. No Prospectuses on the Web Site. Prospectuses should not be published on the web site absent a compelling reason. If a prospectus is published on the web site, it should be placed on an entirely separate web address, with no "links" directing browsers to the Company's web site.
4. No Analyst Reports on the Web Site. Under no circumstances should companies publish analyst reports on their web sites. By publishing analyst reports on the web site, companies could be deemed to have co-authored, ratified, or adopted all forward-looking statements and earnings estimates included in them, thereby subjecting themselves to liability under the "entanglement" doctrine.
5. Diligence Review of Web Site. If the Company is involved in any major transaction, both the Company's and the Underwriters' due diligence investigation should include a full review of the Company's web site. This will ensure, among other things, that statements contained on the web site are consistent with statements contained in a prospectus, registration statement, or other public document.
6. Web Site Address in Prospectuses. A prospectus should not include or direct readers to the Company's web site address. By including the Company's web site address in a prospectus, the Company may unwittingly incorporate the entire web site by reference into the prospectus, thereby subjecting the Company and underwriters to liability should any of the statements on the web site turn out to be false or misleading.
7. Third Party Information on the Web Site. The "entanglement" doctrine also applies to any third party information published on the Company's web site (e.g., consumer surveys or news articles). If the third party information turns out to be inaccurate, the Company could be held liable under the securities law for publishing a false and misleading statement on the web site. If there is certain third party data that must be placed on the web site, there should be a specific disclaimer that the Company has not co-authored, ratified, endorsed, or adopted the information by publishing it. See end of Atlantic Pharmaceuticals, Inc. article.

   1. Private Securities Litigation Reform Act of 1995.