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A Safe Harbor Disclosure is a statement that appears on almost every SEC filing, proxy statement, and press release of every company in the United States. It warns potential or current investors that the information is only the best guess of the company's executives regarding future performance and therefore may not be entirely accurate.

These disclosures became standard practice after Congress passed the Private Securities Litigation Reform Act of 1995. The intent of this law was to reduce the numbers of frivolous shareholder lawsuits. The law set up safeguards for executives so that when they make projections of future performance they can't be held liable when their forecasts are wrong. The law also makes shareholders prove that inaccurate forecasts were purposely misleading (as opposed to just ignorantly misleading or accidentally misleading).

The main purpose of the law was to make it easier and safer for companies and executives to provide projection data such as future earnings, revenue, and sales. Investors have huge demand for such information but until this law was passed companies were reluctant to release it. It is clear that the law greatly increased the amount of information provided to investors (misleading information included).

After this law went into effect, executives were free to report the cheeriest of projections in order to drive up their company's share prices - so long as they followed the provisions of the "Safe Harbor" law. Every wise executive should take full advantage of the law to protect himself and his company.

Example of a boilerplate Safe Harbor Disclosure:

Some of the information contained (in this report / on this Web site / in this press release) contain "forward-looking statements". In many cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue," or the negative of such terms and other comparable terminology. These statements are only predictions. Actual events or results may differ materially as a result of risks facing (Company Name, Inc.) or actual results differing from the assumptions underlying such statements.

These forward-looking statements are made only as of the date hereof, and (Company Name, Inc.) undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise. All forward-looking statements are expressly qualified in their entirety by the "Risk Factors" and other cautionary statements included in the Company's annual, quarterly and special reports, proxy statements and other public filings with the Securities and Exchange Commission.

Statements like the above make it very difficult for shareholders to sue executives that made overly ambitious statements about their companies future performance. There have been thousands of companies bankrupted in the recent stock market crash and the collapse of the internet dot com companies. While it might seem obvious after the fact that these companies were doomed to fail -- the executives are protected as long as it can't be proven they knowlingly and willfully made false statements to investors.

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