Updating the Duty to Update Harmonizing a Continuous Duty with a Periodic Disclosure Regime

Abstract

For decades, courts have struggled to determine whether and when public companies are obligated to update prior disclosures that, although true when made, become misleading as a result of a subsequent event. Prior to 2020, a lack of urgency coupled with an increasingly periodic disclosure regime furthered obscured the role and relevance of this dubious obligation, otherwise known as the duty to update. However, with the paradigmatic subsequent event of COVID-19 still permeating through every aspect of life nearly two years after its onset, the duty to update—and all of its uncertainties—has come into the fore once again. 

This Note suggests three recommendations to the duty to update in light of its renewed relevance. First, the framework for identifying a statement subject to the duty should be streamlined. Second, courts should adopt a consistent materiality test when evaluating potential violations of the duty. Finally, and most importantly, the SEC should utilize its rulemaking power to clarify its calls for more continuous disclosures in the wake of the pandemic. Only then will the duty to update claim its appropriate role in the grand scheme of securities regulation.