Public companies are facing a new wave of allegations of misstatements or omissions in risk factor disclosures made to investors and filed with the SEC. Ongoing uncertainty surrounding tariffs is prompting companies to change foreign business operations, while increased scrutiny of corporate risk disclosures is leading to shareholder securities litigation claims and regulatory enforcement actions invoking the anti-fraud provisions of the federal securities laws.

Over the past several months, court decisions on International Emergency Economic Powers Act (IEEPA) tariffs, Section 232 tariffs, and a resulting increase in the administration’s Section 301 investigations continue to create confusion regarding the ongoing effects of import duties on manufacturing, business operations, and profitability of companies in the U.S. that rely on foreign supply chains.

However, shareholders have begun to challenge tariff-related risk disclosures made by public companies. Item 105 of SEC Regulation S-K requires that a company include in the annual 10-K a "discussion of material factors" that make investing in the company "speculative or risky." Item 105 disclosures address the scope and severity of particular risks facing the individual company, and those that could apply generically to any company, if included, should be identified under the caption "general risk factors" at the end of Item 105.

The most recent shareholder litigation involves the solar technology company First Solar Inc. along with two of its chief executives. Filed June 23, 2026, in U.S. District Court for the Eastern District of New York, the suit alleges that First Solar failed to disclose and repeatedly misrepresented material risks affecting business operations as a result of the Trump administration's tariff policies. According to the complaint, First Solar omitted or misrepresented the risks in violation of Section 10(b) and Rule 10b-5 of the Exchange Act of 1934.

First Solar is now the fifth tariff-related lawsuit filed in federal court since August 25, 2025. You can read our analysis of the first securities class action lawsuit here.

The lawsuits demonstrate that despite the court rulings on tariffs, disclosure of these risks must be robust and cannot rely on generic risk statements regarding business challenges facing the company, its "competitive differentiation" or "headwinds" caused by tariffs, phrases seen in several of the five shareholder disputes. Given the significant implications for public companies and their executives, internal compliance policies and corporate governance procedures should be reassessed to proactively mitigate potential securities fraud claims based on tariff-related risk disclosures made in periodic financial reporting disclosures and other public statements.

Named plaintiff Claire Day represents a class of investors who purchased or sold First Solar securities between February 26, 2025, and February 24, 2026. The plaintiff class alleges defendants made materially false or misleading statements about increasing energy capacity and the demand for and anticipated sales of the company’s panels. According to the plaintiffs, First Solar misled investors and that, despite "near term challenges" related to tariff policy, the company outlook continued to be favorable over the long term. These and other statements regarding tariff-based "headwinds" faced by First Solar understated the costs of tariffs resulting from idle factories in foreign countries, decreased utilization, and lower demand as large customers made the decision to default on multiyear agreements with First Solar.

The complaint also asserts that First Solar misrepresented its ability to overcome the impact of tariffs on factories in Malaysia and Vietnam, and the costs associated with moving finishing production steps to the U.S. to take advantage of domestic manufacturing tax credits.

Additionally, the complaint continues, the company failed to disclose transition and restructuring costs associated with increased U.S. production and continued underutilization of the Malaysia and Vietnam factories, stating that First Solar was "continuing to evaluate options" for those facilities.

According to the plaintiffs, First Solar and its executives violated Regulation S-K Item 105 by failing to disclose the severity of known risks that are reasonably likely to materially impact the results of a company’s continuing operations and financial results. Plaintiffs claim that these and other misstatements or omissions made during the class period violated Section 10(b) of the Exchange Act and Rule 10b-5. Plaintiffs further allege that the First Solar executive officer defendants, as controlling persons, violated the Exchange Act through these fraudulent actions.

Implications of Securities Fraud Claims Based on Tariff-Related Uncertainty

Tariff-related uncertainties appear to be a cornerstone of First Solar’s alleged misrepresentations regarding the company’s resilience despite declining demand from the U.S. market, the costs associated with reduced or halted production in Malaysia and Vietnam due to the tariff-related costs, and the company’s ability and costs of moving finishing production to the U.S.

The ongoing unpredictability of court decisions regarding the legality of the Trump administration’s tariffs continues to be a factor in the assessment of potential disruption to a company’s business. The economic volatility caused by tariffs and the resulting decline in demand in the U.S. must be evaluated for the severity of that risk and whether it rises to the level of materiality that companies must disclose to investors. When formulating tariff-related risk statements, companies should prioritize internal controls around risk assessment and implementation of proper disclosure policies to bolster the company’s supply chain and the ability to weather both decreased product demand and increased retail prices for domestic customers.

Proactive Steps Companies Can Take

Companies should consider the following proactive steps to minimize the potential for hindsight securities fraud claims based on tariff-related risk disclosures in corporate filings and other public statements:

• Temper earnings expectations: Consider whether tariff and customs-related cost increases have put heightened pressure on income, revenue, and profit expectations. If the potential risk is likely to be considered material, companies should factor that impact properly into risk factor disclosures and other statements regarding expected earnings. If, after assessment of the risk under the company’s disclosure compliance procedures, the materiality of the potential impact is reasonably likely to have a material effect on sales, revenue, or income, consider whether appropriate general risk factor disclosure should be made in Regulation S-K Item 105.
   
• Focus on key factors from the investor perspective: Earnings calls, public statements by management, and periodic regulatory disclosures are equally subject to the federal securities laws. Ensure that materiality of the impact of tariff uncertainties specific to the company’s operations, revenues, industry, and financials are properly addressed or recognized as a severe risk when necessary.
   
• Check risk disclosures: Item 303 of Regulation S-K is the catch-all for risks that are not capable of sufficient qualitative or quantitative assessment. When assessing whether a risk is "reasonably likely" to have a material impact, the risk should be analyzed holistically, without reliance on any particular metric of reasonableness or quantitative materiality standard. Engage the company’s board of directors and management’s subject-matter experts on complex risk analyses and whether an Item 303 disclosure is warranted.
   
• Closely follow tariff developments: The Trump administration’s tariffs continue to be in a state of limbo. Implement or expand existing procedures to stay aware of ongoing tariff developments, both legal and administrative. Ensure that management and the board receive regular updates that fully and expeditiously address the risks associated with tariff-related policy.

For more information, please contact me or your regular Parker Poe contact. Click here to subscribe to our latest alerts and insights.