One Lawyer's Perspective:
Disclosure in Today's Financing
Environment

Taken from Greenberg Traurig's Stephen A. Weiss Address to NFA Members

The bottom line is, “nothing takes the place of good due diligence.”

That was part of the critical message Stephen A. Weiss delivered on March 19, at a NFA luncheon. Weiss is a Senior Shareholder at Greenberg Traurig, a national 800-attorney firm. Weiss’ corporate and securities practice and more than three decades of experience helped shed light on disclosure in today’s financing environment and implications for lenders, shareholders and the professional services community.

“Like trading securities on Wall Street, business relationships, including financing deals, are about trust,” said Weiss. “When trust goes in a company or an industry, the fall is quick and fatal.”

Weiss cautioned that “there is now a merger or blurring of the distinction between what lawyers are responsible for and what accountants do in connection with public disclosures and transactions. Today, lawyers must truly understand MD&A and not rely solely on accountants and CFOs to write this section. Professionals are no longer able to hide behind the excuse ‘nobody told me or explained to me the true nature of the transaction.’”

His advice to lenders: “Do more due diligence about your borrower. Merely auditing inventories, receivables and fixed assets and having good coverage is not enough. Lenders must have a true understanding of the prospective borrower’s business and accounting practices.”

“Before issuing commitments, take the time to sit down with management and the outside auditors and make sure that all questions are answered to your satisfaction. Treat this time like a drafting session for a prospectus used in a public offering, knowing that liability can result if things are not fully disclosed or the lender does not understand the true nature of certain transactions.”