The safe harbor provision of the Private Securities Litigation Reform Act encourages companies to make foward-looking statements. Without the risk disclosure, management might be reluctant in making forward-looking statements. Making statements on expectations may result in liability when expected financial performance and other matters that do not later materialize.
Sometimes when expectations do not materialize, there is no relation to fraud. Management might just have had high hopes on strategies being executed only to find that events do not later arise due to uncontrolled or unknown circumstances.
However, does the statute also protect those who knowingly or intentionally lie?
In the Seventh Circuit Court's decision in Asher v. Baxter, the court interpreted that the way the statute was written, one could argue that if someone knowingly lied to the marketplace, but somehow disclosed the statement as a risk, the person might obtain protection under the safe harbor provision.
Since knowing and intentional lies appeared to be what Congress legislated against, Baxter stated that in those circumstances, a risk disclosure did not necessarily allow a company or its management to escape liability.
There is still much debate on this issue though, as the Baxter case created a Circuit split on the safe harbor provision.
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