I noted with favor the other day (to myself, privately) the helpful and interesting commentary on The Glom of our trusted colleague and co-blogger, Usha Rodrigues, regarding the recent press reports on Mylan N.V.'s related-party disclosures.  As the story goes, a firm managed and owned in part by the Vice Chair of Mylan's board of directors sold some land to an entity owned by one of the Vice Chair's business associates for $1, and that entity turned around the same day and sold the property to Mylan for its new headquarters for $2.9 million.  Usha's post focuses on both the mandatory disclosure rules for related-party transactions and the mandatory disclosure rules on codes of ethics.  Two great areas for exploration.

A reporter from the Pittsburgh Tribune-Review called me Thursday to talk about the Mylan matter and some related disclosure issues.  He and I spoke at some length yesterday.  That press contact resulted in this story, published online late last night.  The reporter was, as the story indicates, interested in prior related-party disclosures made by Mylan involving transactions with family members of directors.  This led to a more wide-ranging discussion about the status of family members for various different securities regulation purposes.  It is from this discussion that my quote in the article is drawn.  But our conversation covered many other interesting, related issues.

For example, the reporter's questions also enabled me to tell him a bit about the gap-filling rules in securities regulation.  I specifically called to his attention Rule 12b-20 under the Securities Exchange Act of 1934, as amended, which (as many already know) reads as follows:

In addition to the information expressly required to be included in a statement or report, there shall be added such further material information, if any, as may be necessary to make the required statements, in the light of the circumstances under which they are made not misleading.

Rule 12b-20 and the parallel rule under the Securities Act of 1933, as amended, Rule 408, are often ignored in mandatory disclosure analysis.  Where applicable under each act, these gap-filling rules serve a similar function to that of fraud law–but without the need to consider all of the bells and whistles that fraud liability entails–in advising clients on disclosure issues.  They force the  lawyer and client to look beyond the express disclosure requirements under other, more specific, mandatory disclosure rules to determine whether the omission of any facts not expressly required to be disclosed under those more specific rules makes the responsive disclosures misleading.  If so, all material information must be disclosed to fill that gap so that the disclosed information is not misleading.  The reporter did seem interested in this part of securities law, but any reference to it from our conversation ended up on the cutting room floor, I'm afraid.  So, I took liberty to raise it here, instead!

By the way, I did encourage the reporter to read and consider Usha's post as well.  He also seemed interested in that angle.  Maybe that will lead to a further story . . . ?