Shareholders of a Michigan-based pharmaceutical firm filed a class-action lawsuit alleging that the company’s board of directors violated federal securities laws. The Securities Exchange Commission’s requirement for companies to issue press releases that contain accurate, helpful and relevant information provided the basis for the suit. When a company fails in its duty to provide accurate information, investors may file a complaint to assert their rights. 

After the pharmaceutical company’s management issued a press release containing allegedly inaccurate information, the plaintiff shareholders claimed that its publication artificially inflated the stock price. The apparent and underlying cause was the pharmaceutical company’s reliance on a network of prescription benefit managers to distribute its medications. Each PBM set its own fees and submitted them through its partnership with Medicare Part D plans. Because the pharmaceutical company did not have the ability to calculate differing fees between the various PBM networks, it did not report accurate financial information in its press release. 

The misleading information the company provided caused thousands of investors to suffer serious financial losses. As reported by MLive-The Flint Journal, the company reached a $14.1 million settlement with the class of shareholders. The suit asserted that the company failed to disclose that it could not accurately calculate its fees and that it did not have control over its financial reports. While investors argued these facts were material, the company’s legal team claimed the lawsuit twisted its contract dispute into an elaborate securities fraud swindle. 

Investors generally rely upon information a company provides in order to analyze the markets and plan for the future. As noted by Forbes magazine, when a company provides false or misleading information, allegations of fraud may arise. Shareholders may file a legal action to compensate for financial losses resulting from buying or selling stocks based upon inaccurate information.