The erosion of the materiality standard in the enforcement of the federal securities laws

Business Lawyer

Volumn 62, Issue 2, 2007, Pages 317-357

  Sauer, Richard C ^a,b  

^a US Securities and Exchange Commission

^b Investment Advisory Nrm Lopper Mver Management LLC

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EID: 34547738933     PISSN: 00076899     EISSN: None     Source Type: Journal    
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References (281)

1. Richard bainbridge, Mandatory Disclosure: A Behavioral Analysis, 68 U. CIN. L. REV. 1023, 1028-34 (2000).
2. This is the rationale behind the safe harbor provided for "forward-looking statements" under the Private Securities Litigation Reform Act, Pub, L. No. 104-67, §102, 109 Stat. 737, 749 (adding §27A of the Securities Act of 1933, ch. 38, Title I, 48 Stat. 74 and codified as amended at 15 U.S.C. §77z-2 (2000) and §21E of the Securities Exchange Act of 1934, ch. 404, Title I, 48 Stat, 881 and codified as amended at 15 U.S.C. §78u-5 (2000)). Many other aspects of financial reporting involve elements of estimation and prediction that have no such safe harbor.
3. 17 C.F.R. pt. 243 (2006).
4. Pub. L. No. 107-204, 116 Stat. 745 (2002) (codified in scattered sections of 11, 15, 18, 28, and 29 U.S.C. (Supp. III 2003 and Supp. IV 2004)) [hereinafter "Sarbanes-Oxley"].
5. Sarbanes-Oxley, supra note 4, §§302, 404, and 906,116 Stat, at 777, 789, and 806 (codified at 15 U.S.C. §§7241, 7262, and 18 U.S.C. §1350 (Supp. IV 2004)),
6. Sarbanes-Oxley, supra note 4, § 304, 116 Stat, at 778 (codified at 15 U.S.C. §7243 (Supp. IV 2004)).
7. Sarbanes-Oxley, supra note 4, §401(a), 116 Stat, at 785 (codified at 15 U.S.C. §78(m) (Supp. IV 2004)), The Commission's Final Rule, as now embodied in Regulation S-K, requires disclosure of offbalance sheet arrangements that either have or are "are reasonably likely to have a current or future effect on the registrant's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources..." Regulation S-K, 17 C.F.R. § 229.303(a)(4) (2006).
8. For a further discussion, see Marc Morgenstern, Off-Balance Sheet Disclosures in MD&A, 37 REV, SEC, & COMMOD. REG. 9 (January 28, 2004).
9. See SEC v. Bausch & Lomb Inc., 565 F2d 8, 10 (2d Cir. 1977).
10. See also U.S. Sec. & Exch, Comm'n, Proposed Rule: Selective Disclosure and Insider Trading, 64 Fed. Reg. 72590, 72594 (Dec. 28, 1999);
11. Joan Heminway, Materiality Guidance in the Context of Insider Trading: A Call for Action, 52 AM. U. L. REV. 1131, 1138-39 (2003).
12. Phyllis Diamond, SEC Enforcement: More REG FD Cases in Pipeline, Beller Says at Lawyers' Gathering, 37 SEC. REG. & L. REP. (BNA) 1878 (November 14, 2005).
13. Escott v. BarChris Constr. Corp., 283 F Supp. 643, 682 (S.D.N.Y. 1968).
14. Securities Exchange Act of 1934, ch. 404, §13(a), 48 Stat. 881,894 (codified as amended at 15 U.S.C. § 78(m) (2000 and Supp. IV 2004)) [hereinafter "Exchange Act"];
15. Securities Act Rules 13a-l, 13a-ll, and 13a-13 (codified at 17 CER. §§ 240.13a-l, 240.13a-ll, and 240.13a-13 (2006)).
16. Securities Act of 1933, ch. 38, § 17(a), 48 Stat. 74, 84 (codified as amended at 15 U.S.C. § 77q(a) (2000)) [hereinafter "Securities Act"];
17. Exchange Act, see supra note 11, §10(b), 48 Stat, at 841 (codified as amended at 15 U.S.C. § 78j(b) (2000));
18. Exchange Act Rule 10b-5 (codified at 17 CER. § 240.10b-5 (2006)). There are, however, many disclosure provisions that are not subject to materiality requirements, including the "books and records" and "internal controls" provisions. Exchange Act, supra note 11, §13(b)(2)(A) and (B), 48 Stat, at 894 (codified as amended at 15 U.S.C. §78(m)(b)(2)(A) and (B) (Supp. IV 2004)).
19. 426 U.S. 438 (1976).
20. Id. at 449. For other illustrations of this point, see Basic Inc. v. Levinson, 485 U.S. 224 (1988);
21. SEC v. Texas Gulf Sulphur Co., 446 F.2d 1301, 1305 (2d Cir.), cert, denied, 404 U.S. 1005 (1971);
22. and Jeffrey Davis, Materiality and SEC Disclosure Filings, 24 SEC. REG. LJ. 180 (1996).
23. TSC Indus., 426 U.S. at 445. For an example of the more expansive view of materiality,
24. see Mills v. Elec. Auto-Lite Co., 396 U.S. 375 (1970).
25. TSC Indus., 426 U.S. at 448-49. For another example of this view, see Wielgos v. Commonwealth Edison Co., 892 F.2d 509, 517-18 (7th Cir. 1989).
26. TSC Indus., 426 U.S. at 448.
27. See, e.g., Basic Inc. v. Levinson, 485 U.S.224, 231-32 (1988);
28. Flamm v. Eberstadt, 814 F.2d 1169, 1174 (7th Cir.), cert, denied, 484 U.S. 853 (1987);
29. Steadman v. SEC, 603 F.2d 1126 (5th Cir. 1979), aff'd, 450 U.S. 91 (1981).
30. See, e.g., Securities Act Rule 405 (codified at 17 U.S.C. § 230.405 (2006));
31. Selective Disclosure and Insider Trading, 65 Fed. Reg. 51716, 51721 (August 24, 2000);
32. U.S. Sec. & Exch. Comm'n, Staff Accounting Bulletin No. 99, 64 Fed. Reg. 45150 (Aug. 19, 1999) [hereinafter "SAB 99"], available at http://www.sec.gov/interps/account/sab99.htm.
33. Fin. Accounting Standards Bd ("FASB"), Statement of Financial Accounting Concepts No. 2, Qualitative Characteristics of Accounting Information (1980) [hereinafter "CON 2"], available at http://www.fasb.org/pdf/con2.pdf.
34. SEC v, Guenthner, 395 F. Supp. 2d 835, 846 (D. Neb. 2005). For courts requiringF.similar assessment, see Parnes v. Gateway 2000, Inc., 122 F.3d. 539, 546-48 (8th Cir. 1997), and In re Control Data Corp. Sec. Litig., 933 F2d 616, 621 (8th Cir.), cert, denied, 502 U.S. 967 (1991).
35. See BarChris, 283 F. Supp, at 682;
36. Davis, Materiality and SEC Disclosure Filings, supra note 14, at 183.
37. "Materiality is determined in light of the circumstances existing at the time the alleged misstatement occurred." Ganino v. Citizens Utils. Co., 228 F.3d 154, 165 (2d Cir. 2000).
38. As the accounting literature notes: "... an amount that is material to the financial statements of one entity may not be material to the financial statements of another entity of a different size or nature, Also, what is material to the financial statements of a particular entity might change from one period to another." Am. Inst, of Certified Public Accountants ("AICPA"), Statement on Auditing Standards No. 82, Consideration of Fraud in a Financial Statement Audit, at Appendix C, ¶ 9 (2000) [hereinafter "SAS No. 82"].
39. However, immateriality cannot be assumed from the mere fact that an individual should not be seen as a reliable source of information. See, e.g., In re Jonathan G. Lebed, Rel. No. 33-7891, Rel. No. 34-43307 (September 20, 2000), available at http://www.sec.gov/litigation/admin/ 33-7891.htm;
40. U.S. Sec. & Exch. Comm'n, SEC Sues Washington, D.C. Area Law Student for Internet Price Manipulation Scheme, Litig. Rel. No. 16461 (March 2, 2000), available at http://www.sec.gov/litigation/litreleases/ lrl6461.htm, both of which involved manipulative Internet touting by individuals with no expertise in stock selection.
41. See, e.g., Class Suit Against Trex, Officials Founders on Materiality, Scienter Pleading, 38 SEC. REG. & LAW REP. (BNA)1865 (Nov. 6, 2006);
42. Georgia Fraud Claims Over Optimism by CEO Properly Dismissed, 11th Cir. Affirms, 35 SEC. REG. & LAW REP. (BNA) 153 (Jan. 27, 2003).
43. Texas Gulf Sulphur, 401 F.2d at 849.
44. See also Levinson, 485 U.S. at 238; Castellano v. Young & Rubicam, Inc., 257 F.3d 171, 180 (2d Cir. 2001); In Re: Rockefeller Center Prop., Inc., Sec. Litig., 184 F.3d 280, 294 (3d Cir. 1999);
45. Donald Langevoort, Rereading Cody, Roberts: The Ideology and Practice of Insider Trading Regulation, 99 COLUM. L. REV. 1319, 1337-38 (1999) (discussing conceptual difficulties with the probability/ magnitude test).
46. Regulation S-K, 17 C.F.R. § 229.303 (2006).
47. U.S. Sec. & Exch. Comm'n, Interpretation: Commission Guidance Regarding Managements Discussion and Analysis of Financial Condition and Results of Operations, Rel. Nos. 33-8350; 34-48960 (Dec. 29, 2003), available at http://www.sec.gov/rules/interp/33-8350.htm.
48. Regulation S-K, 17 C.F.R. § 229.303(a) (2006).
49. Daniel Bacastow, Comment, Due Process and Criminal Penalties Under Rule 10b-5: The Unconstitutionality and Inefficiency of Criminal Prosecutions for Insider Trading, 73 J. CRIM. L. & CRIMINOLOGY 96, 108 (1982);
50. Langevoort, supra note 27, at 1337-38 (discussing conceptual difficulties with the probability/magnitude test).
51. See SEC v. Mayhew, 121 F.3d 44, 52 (2d Cir. 1997) and cases discussed therein.
52. TSC Indus., 426 U.S. at 449.
53. Often courts assume that market reaction is a critical factor in determining the materiality of particular disclosure. See, e.g., Akerman v. Oryx Commc'ns, Inc., 810 F.2d 336, 341-42 (2d Cir. 1987);
54. Geiger v. Solomon-Page Group, Ltd., 933 F. Supp. 1180, 1188 (S.D.N.Y. 1996).
55. Oran v. Stafford, 226 F.3d. 275, 282 (3d Cir. 2000) (quoting In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1425 (3rd Cir. 1977)).
56. See id. (ellipses in original). See also In re NAHC, Inc. Sec. Litig., 306 F.3d 1314 (3d Cir. 2002). This approach reflects an accurate understanding of investment as a profit-seeking activity, and of changes in share price as the primary measure of profit. As described below, however, when a change in share price is presented as an evidentiary presumption of materiality, it must be tempered with exceptions to allow for the numerous situations in which the market cannot readily weigh all potentially relevant information. See infra notes 40-42 and accompanying text.
57. See No. 84 Employer-Teamster Joint Council Pension Trust Fund v. Am. W. Holding Corp., 320 F.3d 920, 935 (9th Cir.), cert, denied, 540 U.S. 966 (2003).
58. See SEC v. Hoover, 903 F. Supp. 1135, 1146-47 (S.D. Tex. 1995); SEC v. Butler, Fed. Sec. L. Rep. (CCH), ¶ 93, 244, at 96,222 (WD. Pa. 2005); In re Secure Computing Corp. and John McNulty, Rel. No. 34-46895 (November 25, 2002), available at http://www.sec.gov/litigation/admin/34-46895. htm;
59. SEC v. Siebel Sys., Inc., Litig. Rel. No. 17860 (Nov. 25, 2002), available at http://www.sec.gov/ litigation/litreleases/lrl7860.htm.
60. See Dura Pharms., Inc. v. Broudo, 544 U.S. 336 (2005).
61. See In re Parmalat Sec. Litig., 376 F. Supp. 2d 472 (S.D.N.Y. 2005).
62. See alsoShareholders Allege Materiality, CausationWithout Disclosure, Price-Drop, Court Says,37 SEC. REG. & L. REP. (BNA) 1809 (Oct. 31, 2005).
63. FASB, CON 2, supra note 20, at ¶ 56.
64. This scenario may occur in connection with corporate communications violative of Commission Regulation FD, discussed infra in text accompanying notes 137-54.
65. The Wall Street Journalnotes that direct ownership of stocks by American households has declined from 91% in 1950 to just 32% today See John Bogle, Individual Shareholder, R.I.P., WALL. ST. J., Oct. 3, 2005, at A16. See alsoFeit v. Leasco Data Processing Equip. Corp., 332 F. Supp. 544, 571-72 (E.D.N.Y. 1971) (discussing the role of market professionals in valuing securities).
66. Reiss v. Pan Am. World Airways, Inc., 711 F.2d 11, 13 (2d Cir. 1983).
67. See, e.g., Oran v. Stafford, 226 F.3d 275, 283 (3d Cir. 2000) ("the price stability is dispositive of the question of materiality");
68. Manavazarian v. Atec Group, Inc., 160 F. Supp. 2d 468, 483-84 (E.D.N.Y. 2001);
69. SEC v. Guenthner, 395 F.Supp.2d 835, 848 (D. Neb. 2005).
70. Mayhew, 121 F.3d at 52.
71. Similarly, trading byF.corporate insider who possesses non-public information may be seen as probative as to the duty of his or her employer to disclose the same information, See Heminway, supra note 8. This assumes that the insiders trading was motivated by a desire to exploit the non-public information.
72. U.S. Sec. & Exch. Comm'n, Final Rule: Selective Disclosure and Insider Trading, 65 Fed. Reg. 51716, 51722 (Aug. 24, 2000).
73. See U.S. v. Chiarella, 588 F.2d 1358, 1366-67 (2d Cir. 1978), rev'd on other grounds, 445 U.S. 222 (1980),
74. See also SEC v. Monarch Fund, 608 F.2d 938, 942 (2d Cir. 1979).
75. See SAB 99, supra note 19.
76. The appropriate limits of the staff's suggestion are discussed infra in text accompanying notes 108-36.
77. See, e.g., Levitin v. PaineWebber, Inc., 159 F3d 698, 702 (2d Cir. 1998), cert, denied, 525 U.S. 1144 (1999);
78. Parness, 122 F3d at 546-47; Searls v. Glasser, 64 F.3d 1061, 1066 (7th Cir. 1995);
79. Hillson Partners Ltd. Pship v, Adage, Inc., 42 F.3d 204, 208-09 (4th Cir. 1994);
80. In re Convergent Techs. Sec. Litig., 948 F.2d 507, 513 (9th Cir. 1991).
81. See Marx v. Computer Seis. Corp., 507 F.2d 485, 489 (9th Cir. 1974);
82. Byelick v Vivadelli, 79 F. Supp. 2d 610, 618 (E.D. Va. 1999);
83. Burlington Coat Factory, 114 F3d at 1421 n.9; In re Kidder Peabody Sec. Litig., 10 F. Supp. 2d 398, 410 (S.D.N.Y. 1998).
84. See, e.g., In re Robert M. Blau, Rel. Nos. 33-8581, 34-51809 (June 9, 2005), available at http:// www.sec.gov/litigation/admin/33-8581.pdf. The decision most often cited in support of this boilerplate assertion is SEC v. Larry D. Blavin, 760 F.2d 706 (6th Cir. 1985). The court addressed the materiality of admitted false statements, made in an investment newsletter, concerning the "financial condition, solvency, and profitability of the companies [recommended]." Id. at 711. Noting that the defendant had provided no evidence to the contrary, the court easily reached the conclusion that the materiality of such information "is not subject to serious challenge." Id. (quoting SEC v. Murphy, 626 F.2d 633, 653 (9th Cir. 1980)). The courts in both Blavin and Murphy dealt with crude misrepresentations about investment opportunities. The court's holding in each case was certainly correct, and the categories of information cited are, indeed, often material, but the overly broad language in those opinions is unfortunate.
85. Guenthner, 395 F. Supp. 2d at 847-48.
86. INTERIM REPORT OF THE COMMITTEE ON CAPITAL MARKETS REGULATION (Dec. 5, 2006), at 128, available at http://www.capmktsreg.org/index.html.
87. Id.
88. Yet even when confined to the audit process, the application of such presumptions is limited. See FASB, CON 2, supra note 20, at ¶¶ 125, 167 (stating that the 5-10% range is a useful presumption, but not sufficient in itself to determine materiality); AICPA, Statement of Accounting Standards No. 47, Audit Risk and Materiality in Conducting an Audit (1983) [hereinafter "SAS No. 47"], as amended by AICPA, SAS No. 82, supra note 24. On the role of materiality in the audit process generally, see William Read, John Mitchell, and Abraham Akresh, Planning Materiality and SAS No. 47, J. Acct. (Dec. 1987), at 72.
89. For example, Instruction 2 to Regulation S-K, Item 103 states that an issuer need not disclose pending litigation "if the amount involved, exclusive of interest and costs, does not exceed 10% of the current assets of the registrant." Regulation S-K, 17 C.F.R. § 229.103 (2006).
90. See Ganino, 228 F.3d at 161-64 (discussing U.S. Court of Appeals for the Second Circuit precedent).
91. See also Shuster v. Symmetricon, Inc., No. 94-20024 RMW 1997 WL 269490, at *8 (N.D. Cal. Feb. 25, 1997).
92. Levinson, 485 U.S. at 236. For another illustration of this point, see FASB, CON 2, supra note 20, at ¶ 125.
93. Guenthner, 395 F. Supp. 2d at 847-48.
94. See, e.g., Gebhardt v, Conagra Foods, Inc., 335 F.3d 824, 829 (8th Cir. 2003);
95. Parnes, 122 F.3d at 547; Ganino, 228 F.3d at 164.
96. SEC v. Butler, Fed. Sec. L. Reps. (CCH), ¶ 93,244, at 96,221 (WD. Pa. 2005).
97. FASB, CON 2, supra note 20, at ¶ 123.
98. Davis, Materiality and SEC Disclosure Filings, supra note 14, at 194.
99. SEC v. Price Waterhouse, 797 F. Supp. 1217 (S.D.N.Y. 1992).
100. Id. at 1237 (citations omitted).
101. John M. Fedders, Qualitative Materiality: The Birth, Struggles, and Demise of an Unworkable Standard, 48 CATH. U. L. REV. 41, 41-42 (1998).
102. James Redwood, Qualitative Materiality Under the SEC Proxy Rules and the Fifth Amendment: A Disclosure Accident Waiting to Happen or Two Ships Passing in the Night?, 1992 Wis. L. REV. 315, 316-17.
103. See generally Ralph Ferrara, et al., Disclosure of Information Bearing on Management Integrity and Competency, 76 Nw. U. L. REV. 555 (1981);
104. Homer Kripke, The SEC, Corporate Governance, and the Real Issues, 36 Bus. LAW. 173 (1981);
105. Note, Disclosure of Payments to Foreign Government Officials Under the Securities Act, 89 HARV. L. REV. 1848 (1976).
106. Fedders, supra note 69, at 41. A former Commissioner expressed this view: "SEC enforcement policy has drifted away from the secure moorings of an objective, quantitative and uniform materiality standard... [toward] a materiality standard which is subjective, qualitative and different for different types of issuers or different types of conduct." Roberta Karmel, Qualitative and Differential Disclosure, Remarks to Financial Executives Institute International Conference, Atlanta, Georgia (Oct. 17, 1979) (on file with The Business Lawyer).
107. See U.S. v. Matthews, 787 F.2d 38, 48 (2d Cir, 1986);
108. Iron Workers Local 16 Pension Fund v. HiIb Rogal & Hobbs Co., 432 F. Supp. 2d 571, 586-87 (E.D. Va. 2006);
109. Galati v. Commerce Bank, Civ. No. 04-3252, 2005 U.S. Dist. LEXIS 26851, *15-16 (D.N.J. Nov. 7, 2005);
110. meVC Draper Fisher Jurvetson Fund I, Inc. v. Millennium Partners, L.P., 260 F. Supp. 2d 616, 634 (S.D.N.Y. 2003);
111. Portannese v. Donna Karan Int'l, Inc., No. 97-CV-2011 (CBA), 1998 WL 637547, at *10 n.9 (E.D.N.Y. Aug. 14, 1998);
112. In re Teledyne Defense Contracting Derivative Litig., 849 F. Supp. 1369, 1382 (CD. Cal. 1993);
113. Ciresi v. Citicorp, 782 F. Supp. 819, 823 (S.D.N.Y. 1991), aff'd mem., 956 F.2d 1161 (2d Cir. 1992);
114. Ballan v. Wilfred Am. Educ, Corp.,720 E Supp. 241, 249 (E.D.N.Y. 1989);
115. SEC v. Chicago Helicopter Indus., Inc., No. 79-C-0469, 1980 U.S. Dist. LEXIS 17214, *7-8. (N.D. III. Jan. 18, 1980).
116. See also George Branch and James Rubright, Integrity of Management Disclosures Under the Federal Securities Laws, 37 Bus. LAW. 1447 (1982).
117. Lewis v. Chrysler Corp., 949 F.2d 644, 652 (3d Cir. 1991) (quoting Warner Commc'ns, Inc. v. Murdoch, 581F.Supp. 1482, 1490 (D. Del. 1984)).
118. In re Citigroup, Inc. Sec. Litig., 330 F. Supp. 2d 367, 377 (S.D.N.Y. 2004).
119. In re Sotheby's Holdings, Inc. Sec. Litig., No. 00-Civ.-1041 (DLC), 2000 WL 1234601, at *4 (S.D.N.Y. Aug. 31, 2000).
120. Amalgamated Clothing & Textile Workers Union v. J.P Stevens & Co., Inc., 475F.Supp. 328, 332 (S.D.N.Y. 1975), vacated, 638 F.2d 7 (2d Cir. 1980).
121. Milton Freeman, The SEC and the Citicorp Case: The Legal Issue of Materiality, NAT'LL.J.,NOV. 15, 1982, at 20;
122. John Fedders, Law Enforcement Against Those Who Fail to Disclose Illegal Activity, Address Before the Federal Regulation of Securities Committee of the American Bar Association's Section of Corporation, Banking and Business Law(Nov. 26, 1982), published in14 SEC REG. & L. REP. (BNA) 2057 (1982).
123. Proposed Environmental Disclosures, 40 Fed. Reg. 51656, 51664 (Nov. 6, 1975).
124. Fedders, Qualitative Materiality, supra note 69, at 86.
125. See, e.g., SEC v. Jos. Schiltz Brewing Co., 452 F. Supp. 824, 831 (E.D. Wis. 1978);
126. SEC v. Kalvex Inc., 425 F. Supp. 310, 315 (S.D.N.Y. 1975); In re Accuhealth, Inc. and George Miszke, Rel. No. 34-34646, 1994 WL 499317 (Sept. 8, 1994).
127. See, e.g., Conagra Foods, 335 F.2d at 829-30;
128. Takara Trust v. Molex Inc., 429 E Supp. 2d 960, 979 (N.D. III. 2006).
129. Greenhouse v. MCG Capital Corp., 392 F.3d 650, 659 (4th Cir. 2004).
130. SeeS. REP. NO. 95-114, at 1 (1977), as reprinted in1977 U.S.C.CA.N. 4098, 4099.
131. The Foreign Corrupt Practices Act of 1977, Pub. L. No. 95-213, 91 Stat, 1494 (codified as amended at 15 U.S.C. §§ 78dd-l to 78dd-3 (2000)). The anti-bribery provisions of the FCPA were added as § 30A of the Exchange Act, supra note 11, and codified at 15 U.S.C. § 78dd-l (2000).
132. Exchange Act, supra note 11, § 30A(a) (codified at 15 U.S.C. § 78dd-l(a) (2000)).
133. Regulation S-K, Item 303, 17 CER. § 229.303 (2006).
134. See FASB, Statement of Financial Accounting Standards No. 5, Accounting for Contingencies (1975) [hereinafter "SAS No. 5"]; AICPA, CODIFICATION OF STATEMENTS ON AUDITING STANDARDS § 312, at ¶ 11 [hereinafter "AU"].
135. See Paul J. McNulty, Deputy Attorney General, Memorandum on Principles of Federal Prosecution of Business Organizations (Feb. 2, 2007), available at http://wwwusdoj.gov/dag/speech/2006/ mcnulty_memo.pdf.
136. These provisions were added to Exchange Act, supra note 11, § 13(b)(2)(A) and (B) (codified as amended at 15 U.S.C. § 78m(b)(2)(A) and (B) (2000 & Supp. IV 2004)).
137. Nevertheless, those are not absolute liability provisions, The internal controls provisions do not require faultless accountability, but rather controls that provide "reasonable assurances" that the company can generate GAAP financial statements and keep tabs on corporate assets. As SEC Commissioner Paul S. Atkins has stated, "'reasonableness' really does mean reasonable-it does not mean absolute or certain or perfect." Paul Atkins, Remarks to the European Parliamentary Financial Forum, Oct, 26, 2005, available at http://www.sec.gov/news/speech/spchl02605psa.htm.
138. For similar statements, see Public Company Accounting Oversight Board ("PCAOB"), Auditing Standard No. 2, An Audit of Internal Control Over Financial Reporting Performed in Conjunction With an Audit of Financial Statements (Feb. 15, 2005), at 11; and AICPA, AU, supra note 88, §319, at HI 16-18. The books and records provisions, similarly, require that issuers keep track of their transactions and assets in reasonable, not perfect, detail.
139. Richard Sauer, Internal Controls:F.New Enforcement Frontier?, COMPLIANCE WEEK, Feb. 24, 2004, at l.
140. Litig. Rel. No. 18740 (June 9, 2004), available at http://www.sec.gov/litigation/litreleases/ lrl8740.htm.
141. Id.
142. Id.
143. In re Oil States lnt'1, Inc., Rel. No. 34-53732 (April 27, 2006), available at http://sec.gov/ litigation/admin/2006/34-53732.pdf;
144. In re BellSouth Corp., Rel. No. 34-45279 (Jan. 15, 2002) available at http://www.sec.gov/litigation/admin/34-45279.htm;
145. In re Chiquita Brands lnt'1, Inc., Rel. No. 34-44902 (October 3, 2001), available at http://www.sec.gov/litigation/admin/34-44902.htm;
146. In re lnt'1 Bus. Mach. Corp., Rel. No. 34-43761 (December 21, 2000), available at http://www.sec.gov/ litigation/admin/34-43761.htm.
147. The settlements in all four matters imposed cease-and-desist orders against future violations. All except the Oil States matter also required the company to payF.civil penalty in a parallel district court proceeding. See SEC v. BellSouth Corp., No. 1-02-CV-00113 (N.D. Ga.) (final order entered Jan. 24, 2002 to pay $150,000 fine);
148. SEC v. Chiquita Brands lnt'1, Inc., No. 1:01CV-02079 (D.D.C) (final order entered on Oct. 4, 2001 to pay $ 100,000 fine);
149. SEC v. Int'l Bus. Mach. Corp., No. 1:00-CV-03040 (D.D.C.) (final order entered on Jan. 9, 2001 to pay $300,000 fine). The language "questionable" payments picks up on certain pre-FCPA SEC enforcement actions involving transactions the SEC was apparently not certain violated any law.
150. Codified at 15 U.S.C. § 78m(b)(2) (2000 & Supp. IV 2004).
151. Sarbanes-Oxley, supra note 4, §§302 and 404, 116 Stat, at 777, 789 (codified at 15 U.S.C. §§ 7241 and 7262 (Supp. IV 2004)).
152. Sarbanes-Oxley, supra note 4, §302, 116 Stat, at 777 (codified at 15 U.S.C. § 7241 (Supp. IV 2004)).
153. See id. See also U.S. See. & Exch. Comm'n, Final Rule: Certification of Disclosure in Companies' Quarterly and Annual Reports, Rel. Nos, 33-8124, 34-46427 (Aug. 29, 2002), available at http: //www.sec.gov/rules/final/33-8124.htm;
154. U.S. Sec. & Exch. Comm'n, Final Rule: Management's Report on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, Rel. Nos. 33-8238, 34-47986 (Aug. 14, 2003);
155. Exchange Act Rules 13a-14 (codified at 17 CFR. § 240.13a-14 (2006)) and 15d-14 (codified at 17 CER. § 240.15d-14 (2006)).
156. The anti-bribery provisions of the FCPA come into play only with respect to payments made to foreign officials (broadly defined) not to private parties. Exchange Act, supra note 11, §30A(O(I)(A) (codified as amended at 15 U.S.C. §78dd-2(f)(1)(A) (2000 &r Supp. IV 2004)).
157. Form 8-K, Item 5.05, available at http://www.sec.gov/about/forms/ form8-k.pdf. The instructions to Item 5.05(b) define "implicit waiver" as "the registrant's failure to take action within a reasonable period of time regarding a material departure from a provision of the code of ethics that has been made known to an executive officer... of the registrant."
158. See AICPA, AU, supra note 88, § 333, The responsibility of auditors for detecting illegal acts by audit clients is discussed in detail infra in text accompanying notes 157-85.
159. Exchange Act Rule 13b2-2 (codified at 17 CER. § 240-13b2-2(a)(2) (2006)).
160. See Alan Levinsohn, SECs Levitt Continues Crusade, 82 STRAT. FIN. 87 (Nov, 30, 2000). For Mr. Levitts description of his tenure as chairman, see ARTHUR LEVITT, TAKE ON THE STREET: WHAT WALL STREET AND CORPORATE AMERICA DON'T WANT YOU TO KNOW (Pantheon 2002).
161. Arthur Levitt, The "Numbers Game", Remarks at NYU Center for Law and Business (Sept. 28, 1998), available at http://www.sec.gov/ news/speech/speecharchive/1998/spch220.txt.
162. Id.
163. SAB 99, supra note 19.
164. Id.
165. Id.
166. See Ganino, 228 F.3d at 163-64 (SAB 99 is consistent with existing standards).
167. The formulation of CON 2 is slightly different in emphasis: The omission or misstatement of an item in a financial report is material if, in the light of surrounding circumstances, the magnitude of the item is such that it is probable that the judgment of a reasonable person relying upon the report would have been changed or influenced by the inclusion or correction of the item. FASB, CON 2, supra note 20, at ¶ 132.
168. Id. at ¶ 125.
169. Id. at ¶ 128.
170. AICPA, AU, supra note 88, §317, at ¶ 07.
171. See, e.g, Conagra Foods, 335 F.3d at 830.
172. See, e.g., Ganino, 228 F.2d at 162-67;
173. In re Unisys Corporation Sec. Lit., No. Civ. A. 00-1849, 2000 WL 1367951, at *5-6 (E.D. Pa. Sept. 21, 2000).
174. Levinson, 485 U.S. at 236.
175. See, e.g., Caroline Antonacci, Note, SAB 99: Combating Earnings Management with a Qualitative Standard of Materiality,35 SUFFOLKU.L. REV. 75, 77 (2001).
176. See SEC v. Butler, Fed. Sec. L. Rep. (CCH) ¶ 93,244, at 96221 (WD. Pa. 2005);
177. In re Westinghouse Sec. Litig., 90 F.3d 696, 715 (3d Cir, 1996);
178. Glassman v. Computervision Corp., 90 F.3d 617, 633 (1st Cir. 1996).
179. SAB 99, supra note 19.
180. Id.
181. As described immediately below, the staff emphasizes the importance of intent in materiality analyses elsewhere in SAB 99.
182. Defining management integrity in a way relevant to investors is no easy task. The Commission has recognized that because "information reflecting on management ability and integrity is, in part, subjective, it is difficult to articulate a meaningful, well functioning objective disclosure requirement which will elicit it." U.S. Sec. Sr Exch. Comm'n, Uniform and Integrated Reporting Requirements, 34 Fed. Reg. 34402, 43405 (Aug. 3, 1978). For a case in agreement with this point, see United States v. Matthews, 787 F.2d 38, 47 (2d Cir. 1986).
183. SAB 99, supra note 19, This point was more recently taken up in staff guidance on when a company must restate its financial results to correct for instances of options backdating, See Letter from Chief Accountant to Lawrence Salva, Chairman, Comm. on Corporate Reporting, Fin. Executives Int'1, and Sam Ranzilla, Chairman, Center for Public Co, Audit Firms, Am. Inst, of Certified Public Accountants (September 19, 2006), available at http://www.sec.gov/info/accountants/staffietters/ fei_aicpa091906.htm (on accounting for stock options in the historical financial statements of public companies: "Evaluation of materiality requires a consideration of all relevant facts and circumstances, Qualitative factors (for example, if the error is intentional) may cause misstatements of quantitatively small amounts to be material.").
184. See supra notes 82-83 and accompanying text.
185. Levitt, The "Numbers Game," supra note 106.
186. As an evidentiary matter, this presumption tends to conflate two separate legal elements of a securities fraud cause of action, making the materiality element redundant in any case in which scienter of the conscious intent variety can be established. That materiality must be proved as a distinct element of a securities fraud claim, however, is beyond question. LOUIS LOSS AND JOEL SELIGMAN, SECURITIES REGULATION, 2071-75, 3412, 3417 (3d ed.1989).
187. No. 84 Employer-Teamster Joint Council, 320 F.3d at 935. SAB 99 attempts to bolster its argument by averring to provisions of the securities laws that do not contain a materiality requirement. In a QSrA section, the release asks, "[M]ay a registrant make intentional immaterial misstatements in its financial statements?" The answer is "No. Under certain circumstances, intentional immaterial statements are unlawful." The release then references the books and records and internal controls provisions of the securities laws, which, as described above, may indeed be violated through immaterial misstatements. SAB 99, supra note 19. Although this statement is unobjectionable in itself, it is irrelevant to the application of the materiality standard, the subject of SAB 99.
188. Id.
189. Id.
190. Task Force on Regulation FD of the Committee on Federal Regulation of Securities, ABA Committee on Federal Regulation of Securities Report on Regulation FD (2002), SH013 ALI-ABA 319 (Westlaw), at 324.
191. U.S. Chamber of Commerce, Report on the Current Enforcement Program of the Securities and Exchange Commission, at 18 n.59 (March 2006), available at http://www.uschamber.com/NR/ rdonlyres/ eodmudjqljq21vttjhn56rn4uubva3yoyzeijj2sh4ugkxlo6xyrpu3cqismvuckpg ea3o4gpn4utyo7uzs7ueqydmc/0603SECEnforcementStudy.pdf.
192. In re Huntington Bankshares, Inc., Rel. Nos. 33-8579, 34-51781 (June 2, 2005), available at http://www.sec.gov/litigation/admin/33-8579.pdf.
193. Id.
194. See, e.g., Letter from Larry Spirgel, Assistant Director, Division of Corporation Finance, SEC, to KT Corporation, Re: KT Corporation Form 20-F for Fiscal Year Ended December 31, 2005, File No. 1-14926 (September 21, 2006) (on file with The Business Lawyer); Letter from Larry Spirgel, Assistant Director, Division of Corporation Finance, SEC, to Verizon Communications Inc., Re: Verizon Communications Inc. Form 10-K for Fiscal Year Ended December 31, 2005, Filed March 14, 2006, and Form 10-Q for the Quarterly Period Ended June 30, 2006, File No, 1-8606 (October 3, 2006) (on file with The Business Lawyer).
195. The communication of accurate information does not cause liability for fraud or market manipulation, and the communication of non-public information by management to analysts, if intended to benefit the company, arguably does not involve a breach of duty by management necessary for insider trading liability.
196. 65 Fed. Reg. 51716 (Aug. 24, 2000) (codified as amended in 17 CER. pt. 243 (2006)).
197. John A. Jordak, Jr. and William R. Terpening, Focus; Regulation FD; Don't Winh at the Analysts, and No Nodding at Those Institutional Investorsl, No. 49 Corporate Counsel Weekly (Dec. 21, 2005).
198. See 65 Fed. Reg. at 51721-22.
199. See also SEC Commissioner Laura S. Unger, Special Study: Regulation Fair Disclosure Revisited (Dec. 2001), available at http://www.sec.gov/news/ studies/regfdstudy. htm (".. .liability under Reg. FD hinges on materiality").
200. 65 Fed. Reg. at 51721.
201. See supra note 102.
202. See generally Nicholas Kappas, Note, A Question of Materiality: Why the Securities and Exchange Commission's Regulation Fair Disclosure Is Unconstitutionally Vague, 45 N.Y.L. SCH. L, REV. 651 (2002);
203. Jason Michael Craft, What's All the Commotion?: An Examination of the Securities and Exchange Commission's Regulation FD, 14 DEPAUL Bus. St COM. L.J. 119, 156 (2001).
204. SEC v. Siebel Sys., Inc., 384 F. Supp. 2d 694 (S.D.N.Y. 2005).
205. SEC v. Flowserve Corp., Litig. Rel. No. 19154 (March 24, 2005), available at http://www.sec. gov/litigation/litreleases/lr19154 .htm.
206. 65 Fed. Reg. at 51722.
207. Report on Regulation FD, supra note 132, at 325.
208. Melissa Brown, First Reg FD Decision Finds SEC's 'Excessive Scrutiny' Chills Disclosure, 37 SEC. REG. & LAW REP. (BNA) 2105 (December 19, 2005).
209. In re Schering-Plough Corp., Rel. No 34-48461 (September 9, 2003), available at http://www.sec.gov/litigation/admin/34-48461.htm;
210. SEC v. Schering-Plough Corp., Lit. Rel. No. 18740 (June 9, 2004),
211. Rachel McTague, Court Throws Out SEC Lawsuit Alleging Siebel Made Improper Disclosures, 37 SEC. REG. Sr LAW REPORT (BNA) 1518 (September 19, 2005).
212. Siebel Sys., Inc., Litig. Rel. No. 17860, supra note 38.
213. Siebel Sys., 384 E Supp. 2d at 694.
214. Similarly, for a settled action in which the company paid a $400,000 civil penalty for reaffirming previous earnings guidance, see Flowserve Corp., Litig. Rel. No. 19154, supra note 145.
215. Siebel Sys., 384 E Supp. 2d at 704.
216. Rachel McTague, SEC Official Says Enforcement Staff Seeking Actions Against Outside Directors, 37 SEC. REG. Sr L. REP. (BNA) 2098 (December 19, 2005) (quoting SEC Enforcement Director Alan Beller).
217. David Beck, The Legal Profession at the Crossroads: Who Will Write the Future Rules Governing the Conduct of Lawyers Representing Public Corporations, 34 ST. MARY'S L. J. 873, 874-75, 880, 881 (2003);
218. Christina Salem, Note, The New Mandate of the Corporate Lawyer After the Fall of Enron and the Enactment of the Sarbanes-Oxley Act, 8 FORDHAM J. CORP. Sr FIN. L. 765, 767 (2003).
219. The seminal statement of this sentiment was made by Judge Stanley Sporkin in Lincoln Sav. & Loan Ass'n v. Wall, 743 F. Supp. 901, 920 (D.D.C. 1990).
220. On the characterization of attorneys as gatekeepers, see JOHN C. COFFEE. JR., GATEKEEPERS: THE ROLE OF PROFESSIONALS IN CORPORATE GOVERNANCE (Oxford Univ. Press 2006); John Coffee, The Attorney as Gatekeeper: An Agenda for the SEC, 103 COLUM. L. REV. 1293 (2003).
221. AICPA, AU, supra note 88, § 316.
222. AICPA, AU, supra note 88, § 317, at ¶.08.
223. Id. at ¶.10.
224. Id. at ¶.03.
225. AICPA, AU, supra note 88, § 9333, at ¶.03.
226. See FASB, SAS No.5, supra note 88.
227. AICPA, AU, supra note 88, § 9333, at ¶.08 ("A letter of audit inquiry to the client's lawyer is the auditor's primary means of obtaining corroboration of the information furnished by management concerning litigation, claims and assessments."). The appropriate procedure for obtaining a letter from the client's lawyers was delineated in an agreement between the ABA and the AICPA commonly referred to as "the Treaty," which can be found at AICPA, AU, supra note 88, § 337C, at Exhibit II - American Bar Association Statement of Policy Regarding Lawyers' Responses to Auditors' Requests for Information. The purpose of the Treaty was to provide a protocol for the provision of information to auditors by company counsel in a manner that neither impinged on the attorney/client privilege nor required counsel to make admissions potentially damaging to the client.
228. See KennethWiner & Scott Seabolt, Responding to Audit Inquiries in a Time of Heightened Peril, 36 SEC. REG. & L. REP. (BNA) 1903 (October 4, 2004).
229. AICPA, AU, supra note 88, § 317, at ¶.15.
230. Id. at ¶.17.
231. Id. at ¶.16.
232. See S. REP. NO. 104-98, at 29 (1995).
233. AICPA, AU, supra note 88, § 326.
234. Exchange Act, supra note 11, § 10(b)(1) (codified as amended at 15 U.S.C. § 78j(b)-1(a)(1) (2000)).
235. Exchange Act, supra note 11, § 10(b) (codified as amended at 15 U.S.C. § 78j(b) (2000)).
236. Id.
237. See H. REP. NO. 104-369, at 47 (1995).
238. The conviction was later overturned by the U.S. Supreme Court as a result of its finding that a jury instruction was improperly permissive. Andersen v. United States, 544 U.S. 696 (2005). That decision may represent the ultimate Pyrrhic victory as Arthur Andersen was, by then, effectively defunct. See State Officials Revoke Andersen's License, HARTFORD COURANT, Sept. 21, 2002, at E2.
239. In re KPMG LLP, Rel. No. 34-50564 (October 20, 2004), available at http://www.sec.gov/litigation/ admin/34-50564.htm.
240. Id.
241. Id.
242. Id.
243. See Id. See also In re Gary L. Seidelman, CPA, Rel. No. 34-50179 (August 11, 2004), available at http://www.sec.gov/litigation/admin/34- 50179.htm, in which a PricewaterhouseCoopers auditor was the subject of an administrative enforcement action based, among other things, on his alleged failure to properly document in his audit working papers "any quantitative or qualitative considerations" in the audit.
244. Exchange Act, supra note 11, § 10A(a)(1) (codified as amended at 15 C.F.R. § 78j-1(a)(1) (2000)).
245. Rachel McTague, Attorneys Blame Increase in Restatements on Auditor Reporting, 'Materiality' Definiton, 38 SEC. REG. & LAW REP. (BNA) 1795 (Oct. 23, 2006) ("A parking violation is a possible illegal act under 10A").
246. 181, AICPA, AU, supra note 88, § 317 at ¶.08, and THOMAS W. GOLDEN, STEVEN L. SKALAK, AND MONA M. CLAYTON, A GUIDE TO FORENSIC ACCOUNTING INVESTIGATION (2006), at Ch. 1.
247. 182, See PCAOB, Auditing Standard No. 2, supra note 91, at 11. See also AICPA, AU, supra note 88, § 319, at ¶¶ 16-18;
248. DON ZARIN, DOING BUSINESS UNDER THE FOREIGN CORRUPT PRACTICES ACT § 3.22 (Practising Law Inst. 2004).
249. 183, Exchange Act, supra note 11, § 10(b) (codified as amended at 15 U.S.C. § 78j(b) (2000)).
250. See H. REP. NO. 104-369, at 47 (1995).
251. Ann C. Logue, Materiality Threshold Drops to 'Zero' for Restatements, COMPLIANCE WEEK, August 2005, at 50. According to a spokesperson for KPMG LLP, restatements increased at a rate of approximately 50% a year from 2003 through 2005, many of the restatements being highly technical in nature. Jacquelyn Lumb, Conference Panelists Discuss Earnings Guidance and Accounting Issues, SEC FILINGS INSIGHT ONLINE, Vol. 12, Issue 5 (February 28, 2006) (quoting Teresa lannaconi). Recently-issued Staff Accounting Bulletin No. 108 will, under certain circumstances, also require restatements in instances in which many auditors would previously have deemed them unnecessary. U.S. Sec. & Exch. Comm'n, Staff Accounting Bulletin No. 108 (Sept. 13, 2006), available at http://www.sec.gov/ interps/account/sab108.htm.
252. Sarbanes-Oxley, supra note 4, § 404, 116 Stat. at 789 (codified at 15 U.S.C. § 7262 (Supp. IV 2004)).
253. U.S. Sec. St Exch. Comm'n, Final Rule: Management's Report on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, 68 Fed. Reg. 36636, 36642 (June 18, 2003).
254. Id.
255. PCAOB, Release 2006-007, Proposed Auditing Standard - An Audit of Internal Control Over Financial Reporting Performed in Conjunction With an Audit of Financial Statements (Dec. 19, 2006), available at http://www.pcaobus.org/rules/docket_021/2006-12-19_release_no._2006-007.pdf.
256. PCAOB, Auditing Standard No, 2, supra note 91, at ¶ 23,
257. Id. at ¶ 22.
258. Id. at ¶ 23.
259. Id. This presumably excludes information of interest solely to irrational individuals who, for reasons known only to themselves, are attracted to the analysis of financial statements.
260. See generally U.S. Sec. & Exch. Comm'n, Roundtable Discussion on Second-Year Experiences with Internal Control Reporting and Auditing Provisions (May 10, 2006), available at http://www.sec.gov/spotlight/ soxcomp/soxcomp-transcript.txt.
261. SEC Proposes Management Guidance on Evaluation of SOX Internal Controls, Vol. 12, No. 12 WORLD SEC. L. REP. (BNA) (Dec. 2006) (quoting Commissioner Paul Atkins, "We need to discard the obsessive-compulsive mentality that has dominated the 404 process to date.").
262. See U.S. Sec. & Exch. Comm'n, Proposed Interpretive Guidance for Management's Report on Internal Control over Financial Reporting, Rel. Nos. 33-8762, 34-54976 (December 20, 2006), available at http://www.sec.gov/ rules/proposed/2006/33-8762.pdf;
263. U.S. Sec. St Exch. Comm'n, Concept Release Concerning Management's Reports on Internal Control Over Financial Reporting, Rel. No. 34-54122 (July 11, 2006), available at http://www.sec.gov/rules/concept/2006/34-54122. pdf; PCAOB, Release No. 2006-007, supra note 189.
264. PCAOB Release 2006-007, however, does attempt to bring the process of evaluating internal controls squarely under the legal standard of materiality:... commentators have expressed concern about several aspects of AS No. 2 relating to materiality, including the concern that auditors have interpreted the standard as directing them to search for all potential defects in internal control, regardless of the effect on financial reporting. While such an interpretation is contrary to the Board's intentions regarding the scope of the audit of internal control as well as the provisions of AS No. 2 itself, the proposed standard on auditing internal control addresses these concerns by further clarifying that the auditor should plan and perform the audit of internal control using the same materiality measures used to plan and perform the audit of the annual financial statements. PCAOB, Release 2006-2007, supra note 189, at 13.
265. Sarbanes-Oxley, supra note 4, § 307, 116 Stat. and 784 (codified at 15 U.S.C. § 7245 (Supp. IV 2004)).
266. Id.
267. U.S. Sec. St Exch. Comm'n, Final Rule: Implementation of Standards of Professional Conduct for Attorneys, Rel. Nos. 33-8185, 34-47276 (August 5, 2003) (codified at 17 C.F.R. pt. 205), available at http://www.sec.gov/rules/ final/33-8185.htm.
268. See supra note 14 and accompanying text.
269. "Material violation means a material violation of an applicable United States federal or state securities law, a material breach of fiduciary duty arising under United States federal or state law, or a similar material violation of any United States federal or state law." 17 C.F.R. § 205.2(i) (2006).
270. 17 C.F.R. § 205.2(d) (2006).
271. 17 C.F.R. § 205.2(e) (2006).
272. Further explanation is provided by the statement, "[r]easonable or reasonably denotes, with respect to the actions of an attorney, conduct that would not be unreasonable for a prudent or competent attorney." 17 C.F.R. § 205, 2(1) (2006).
273. 17 C.F.R. § 205.2(b) (2006).
274. See U.S. Sec. & Exch. Comm'n, Final Rule: Implementation of Standards of Professional Conduct for Attorneys, supra note 200. It is clear, however, that there is no "reporting out" or "noisy with-drawal" requirement imposed on attorneys by the Rule. Such a proposal, which would have brought this provision more in line with Section 10A, was extensively considered by the Commission but not adopted as part of the Final Rule, largely out of concern as to what effect such a requirement would have on the relationship between corporate counsel and their clients.
275. Chiarella v. United States, 445 U.S. 222, 228 (1980).
276. Kappas, A Question of Materiality, supra note 143, at 670.
277. Heminway, Materiality Guidance in the Context of Insider Trading: A Call for Action, supra note 8, at 1165-66 (ambiguity of standards leads to conservative decisions).
278. Rachel McTague, Former SEC Chairman Hills Urges Agency to Make Financial Statements More Relevant, 38 SEC. REG. St L. REP. (BNA) 11 (Jan. 2, 2006).
279. Glenn Miller, Note, Staff Accounting Bulletin No. 99: Another Ill-Advised Foray into the Murky World of Qualitative Materiality, 95 Nw.U.L. REV. 361, 384 (2000).
280. As SAB 99 States, "...quantifying, in percentage terms, the magnitude of a misstatement is only the beginning of an analysis of materiality; it cannot appropriately be used as a substitute for a full analysis of all relevant considerations." SAB 99, supra note 19.
281. Thus, it might be said that each purported qualitative factor has its own quantitative dimension.