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What You Need to Know: Translation Risk Management

The first step in producing an effective translation risk management strategy is to determine sources of risk. For financial services companies, risk comes in two forms:

1. Regulatory Compliance
2. Liability

In 1998, Crimson commissioned a legal memorandum from the law firm of Kirkpatrick & Lockhart to outline regulatory obligations and potential liabilities for translation (click here and enter your password to download a free PDF version of this memo). Key findings include:

• "Section 11(a) of the 1933 Act imposes liability on, among others, an issuer, its directors, and any underwriter of a security for material misstatements or omissions..."
• "Section 12(a)(2) provides that any person who offers or sells a security by means of a prospectus or oral communication which includes material misstatements or omissions is subject to civil liability to any purchaser of the security."
• "Section 17(a) of the 1933 Act and Rule 10b-5 of the Securities Exchange Act of 1934 impose liability for material misstatements or omission in connection with the offer or sale of a security."
• "Various anti-fraud provisions of the federal securities laws create potential liability for a Fund and other parties if the translation of a Foreign Language Prospectus differs from the English version in a manner that renders the Foreign Language Prospectus materially false or misleading."

The message to financial services firms is clear:

1. Accuracy in translated communications counts—compliance violations have severe consequences.
2. Exercise "all reasonable care and consideration" in choosing your translation vendor—your vendor selection criteria and in-process documentation can be used to guard against potential liability.

Contact Crimson (Boston or San Francisco) to learn more about how our ISO-compliant quality system and processes can provide you with enhanced translation risk management and liability protection.