{"id":32004,"date":"2025-08-11T11:35:38","date_gmt":"2025-08-11T16:35:38","guid":{"rendered":"https:\/\/www.bbrown.com\/?post_type=insight&p=32004"},"modified":"2025-08-19T10:45:20","modified_gmt":"2025-08-19T15:45:20","slug":"tariffs-at-the-top-the-risk-agenda-for-executive","status":"publish","type":"insight","link":"https:\/\/www.bbrown.com\/us\/insight\/tariffs-at-the-top-the-risk-agenda-for-executive\/","title":{"rendered":"Tariffs at the Top | The Risk Agenda for Executives"},"content":{"rendered":"

[vc_row row_style=”page-hero” full_width=”stretch_row_content”][vc_column]\n\t

\n\n\t\t
\n\t\t\t
<\/div>\n\t\t\t\t\t\t\t
<\/div>\n\t\t\t\t\t<\/div>\n\n\t\t
\n\t\t\t
\n\t\t\t\t
\n\n\t\t\t\t\t\n
\n

Property & Casualty<\/p>\n

\n Tariffs at the Top | The Risk Agenda for Executives\n <\/h1>\n\t\n <\/div>\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t<\/div>\n\n\t<\/div>\n\n\t\n[\/vc_column][\/vc_row][vc_row][vc_column width=”2\/3″]\n
\n \n

\n Tariffs at the Top | The Risk Agenda for Executives\n <\/h1>\n\t\n <\/div>[vc_column_text css=””]<\/p>\n

Overview<\/h3>\n

As the Trump Administration continues to impose import taxes on goods from other countries in an effort to boost American manufacturing and protect domestic jobs, the reverberations are felt in the C-Suite. These often unpredictable tariffs have disrupted corporate supply chains and financial results.1<\/sup> This volatile environment has the potential to create legal and regulatory disclosure risks for directors and officers who are increasingly caught in the crosshairs of a trade war. It is expected that the U.S. Securities and Exchange Commission (SEC) will maintain its scrutiny and impose penalties on executives who violate securities laws by making misleading disclosures in response to the tariff-related disruptions.<\/p>\n

Regulatory Action<\/h3>\n

While the current administration\u2019s tariff policy may feel like a new challenge, there are numerous precedents involving companies that allegedly misrepresented supplier contracts. In 2021, Kraft Heinz Company agreed to pay $62 million in civil penalties. Chief Operating Officer Eduardo Pelleissone and former Chief Procurement Officer Klaus Hofmann were charged with financial misrepresentation spanning several years, specifically falsifying supplier contracts to inflate cost savings.\u00b2 The SEC found that Kraft had negligently disregarded internal accounting controls, violating provisions of the federal securities laws by failing to maintain robust systems that provide reasonable assurances for stakeholders. 15 U.S.C. \u00a7 78m(b)(2)(B) (2024).<\/p>\n

In 2023, American Patriot Brands, Inc., Urban Pharms, LLC, DJ & S Property #1, LLC, TSL Distribution, LLC, Robert Y. Lee, Brian L. Pallas, And J. Bernard Rice, were charged with making false and misleading statements to investors about the scope of operations.\u00b3 The complaint alleged that senior executives fabricated business prospects to entice investors.\u2074 This added layer of risk, perpetuated by the recent tariff policies, are forcing executives to balance SEC compliance with strategic corporate decisions.<\/p>\n

More recently, the SEC charged Centene CEO Sarah London with misleading investors about the company\u2019s financial prospects and failing to disclose material facts about overall profitability.\u2075 These accusations led to a 40% stock drop and an $11 billion devaluation in a single day. This case underscores the SEC\u2019s heightened focus on fraud and misrepresentation, particularly when companies disregard Regulation S-K disclosure obligations. Of particular relevance is Item 105 of Regulation S-K, which requires a summary of material risk factors, including those arising from tariff disruptions. 17 C.F.R. \u00a7 229.105 (2024). The Centene matter has evolved into an ongoing class action in the Southern District of New York.<\/p>\n

Furthermore, every SEC enforcement case filed in federal court during the second quarter of 2025 alleged fraud.\u2076 This creates a high-risk environment for directors and officers who engage in misconduct in response to tariff policies, whether through supply chain misrepresentations, manipulating financial reports or weak internal controls.<\/p>\n

Beyond SEC oversight, the Trump Administration\u2019s Department of Justice is aggressively enforcing compliance with the Administration\u2019s tariff policies. On July 16, 2025, a complaint was filed against Global Office Furniture, LLC owner, Malcom E. Smith, for improperly underpaying customs duties owed on imported office chairs.\u2077 Under the False Claims Act, the company allegedly knowingly underpaid tariffs imposed on Chinese-manufactured furniture during the first Trump Administration. 31 U.S.C. \u00a73729(a)(1)(B) (2018). This reflects a growing willingness to hold directors and officers accountable for tariff evasion, even retroactively.<\/p>\n

Limiting Exposure with D&O Coverage<\/h3>\n

Tariffs remain a hot button issue, drawing attention from both the public and regulators. The combination of heightened scrutiny and uncertainty in the tariff application presents significant challenges for organizations making public disclosures. With increased exposure and threat of lawsuits against directors and officers, it is crucial for companies to understand the current risks and proactively protect themselves.<\/p>\n

When new risks emerge, it is an opportune time to review insurance programs, particularly Directors and Officers (D&O) insurance, to help ensure adequate coverage and appropriate limits for tariff-related exposures. A robust D&O policy can help mitigate the financial impact of securities class actions, regulatory investigations and enforcement actions stemming from trade policy disruptions. Here is what to look for:<\/p>\n

Securities Claims Coverage<\/h4>\n