Petroleum Geology and the Securities Laws: Implications for Professional Practice

ABBOTT, DAVID M., JR., and CARLEEN H. ACHUFF, U.S. Securities and Exchange Commission, Denver, CO

Many geologists' practice includes such activities as recommending prospects, estimating reserves, and assembling drilling deals. When other people's money is used to finance these and other activities, the geologist, knowingly or not, becomes subject to the securities laws. Full disclosure to investors of all relevant information is the primary securities law principle affecting geological practice. In particular, geologic recommendations or reports reaching investors must effectively communicate both the upside potential and the downside risks of the project. If investors feel misled, the geologist may be sued for statements made in or based on his or her reports or for failing to discuss significant factors. To reduce this risk, professional reports should state the date of the rep rt, what was done, for whom, what data and underlying assumptions were used, what remains to be done, what is recommended, and whether distribution of the report should be restricted, among other things. Always retain a copy in case questions about the report's contents arise. Remember, reports tend to be passed along with the project and can be used or misused several years later by successors in interest in the project. In today's litigious society, there is an increasing likelihood that geologists may have to defend their work in court. Geologists should be aware of the impact of the securities and other laws on their practice.(The authors' views are their own and do not necessarily reflect the views of the Commission or other members of its staff.)

AAPG Search and Discovery Article #91004 © 1991 AAPG Annual Convention Dallas, Texas, April 7-10, 1991 (2009)