Key takeaways

• On September 9, 2016, the Securities and Exchange Commission (“SEC”) filed a complaint against RPM International Inc. (“RPM”) and its general counsel that should serve as a reminder for any registrant subject to a government investigation to ensure that it has robust procedures in place to review disclosure requirements in connection with government investigations in light of the facts uncovered by any internal investigation and the course of settlement discussions with the government.
• The complaint alleges that RPM violated federal securities laws due to the company’s failure to timely disclose a loss contingency, or record an accrual, for a U.S. Department of Justice (“DOJ”) investigation into an alleged violation of the False Claims Act.
• The SEC’s action against RPM serves as a reminder about the importance of transparency in the process around evaluating disclosures, particularly around areas of judgment such as accrual decisions. It also underscores the importance for internal transparency among general counsel, c-suite employees and the audit committee when dealing with situations as dynamic and unpredictable as government investigations and settlement negotiations.