Regulation FD Violations Cited for Selective Disclosure to Fund Manager
A publicly traded company agreed to pay a $400,000 fine for violating Regulation FD by selectively disclosing negative earnings information to a registered investment adviser. During the company’s earnings blackout period, the CEO, in a telephone call, warned the RIA, who managed several private funds, that performance was not as expected. The fund manager sold the stock, which fell in price immediately and upon public disclosure of the negative information. The SEC charged the company and its CEO for selectively disclosing material, nonpublic information.
OUR TAKE: The SEC has stepped up Regulation FD enforcement over the last couple of years. Advisers and fund managers should be aware of Regulation FD’s prohibitions to understand the limits placed on dissemination of material non-public information and to avoid any appearance of soliciting a violation.