Investor relations officers and their support teams – including counsel – have done a great job in regard to RegFD. Since its initiation on August 23, 2000, the SEC has only had15 RegFD enforcement actions.
I had not realized this until I read Orrick, Herrington & Sutcliffe LLP’s well-written observations of Fist Solar’s IRO violation. It gives a quick litigation historical snapshot of RegFD. I suggest reading the Orrick paper here.
The unfortunate situation highlighted three points:
- The company itself was not charged with a violation as they had demonstrated an “environment of compliance.” Policy. Policy. Policy.
- The SEC is “extremely concerned” about one-on-one meetings.
- IROs still need to heed the cautious wisdom of their lawyers. This certainly is a one of the factors why IR is not deep into social media channels yet. Does this cautiousness stifle communications? Probably, but general counsel are long-tail (buy & hold) people and work with IR to protect the company’s shareholder value.
” Second, the Polizzotto action is significant because, unlike in Siebel Systems, the SEC did not charge the company itself. This was largely due to First Solar’s “extraordinary cooperation with the [SEC’s] investigation.” The SEC cited the following:
- First Solar had cultivated an “environment of compliance” through the use of a disclosure committee that focused on compliance with Regulation FD (though even that environment of compliance was not sufficient to prevent Polizzotto’s alleged violations).
- The company immediately discovered Polizzotto’s selective disclosure and promptly issued a press release the next morning before the market opened.
- First Solar then quickly self-reported the alleged misconduct to the SEC.
- Concurrent with the SEC’s investigation, the company undertook remedial measures to address the improper conduct. For example, the company conducted additional Regulation FD training for employees responsible for public disclosure.”
Policy. Policy Policy.
Have a great day.