Watch Your Mouth

As Reg FD enters its fourth year, enforcements so far offer hints on how to communicate.

The main guideline from the Reg FD violations: “If business will not meet expectations, don’t do [any] meetings,” says McCoun. “Or if you still do the meeting, don’t do it until you put out a new set of expectations.” Reg FD is not meant to clamp down on information, he says. Instead, it formalizes “what the best communication practices are.”

Those policies are still subject to SEC scrutiny, however. And as far as enforcement is concerned, Feldman says, “the end point of the journey is not clear yet. We’re just on the bleeding edge.”

Lori Calabro is a deputy editor at CFO.

Recapping a Reg

Disclosure decisions made by the SEC to date.

Company REG FD Infraction SEC Action
Raytheon,
Lexington, MA
In February 2001, CFO Franklyn Caine allegedly gives Q1 and full-year guidance to selected analysts . Cease-and-desist order issued November 25, 2002. Caine resigns shortly thereafter.
Siebel Systems
San Mateo, CA
On November 5, 2001, CEO Thomas Siebel allegedly discloses positive information at invitation-only technology conference. Siebel’s stock price rises 20%. After November 25, 2002, cease-and-desist order, company agrees to pay $250,000 fine, the first levied under Reg FD.
Secure Computing,
San Jose, CA
In March 2002, CEO John McNulty allegedly discloses material nonpublic information about a contract to two portfolio managers. Cease-and-desist order issued November 25, 2002.
Motorola,
Schaumburg, IL
Company IR director, told by general counsel that specifics of its sales reduction weren’t material, tells analysts “significant” weakness means “25% or more.” “Report of an Investigation” (instead of enforcement action) says that the “legal advice, however erroneous, was sought and given in good faith.”
Schering-Plough,
Kenilworth, NJ
Former CEO Richard Kogan, through “spoken language, tone, emphasis, and demeanor,” discloses negative info in private analyst meetings. Stock falls 17%. After September 9, 2003, order, company pays $1 million civil penalty. Kogan pays $50,000, the first time an individual REG FD penalty is assessed.

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