CFO Penalized for Violating Regulation FD
The CFO of a public company was ordered to cease and desist and pay a $25,000 in connection with delivering earnings estimate information to analysts in violation of Regulation FD. Despite knowing the requirements of Regulation FD (which prohibits selective disclosure of material information), the Respondent sent an e-mail from his home account to eight sell-side analysts, informing them that second quarter earnings estimates would be significantly lower than previously disclosed. The SEC indicated that the Respondent drafted the company’s investor relations policy and received training from counsel. The company immediately cured the violation by filing an 8-K on the next business day.
OUR TAKE: The SEC rarely takes action against an individual for violations of Regulation FD, most likely because the individual corporate officer rarely benefits personally. This new “get-tough” policy may chill legitimate disclosure to the buy side.