SEC alleges Reg FD violation for selective disclosure to analysts aimed at reducing consensus revenue estimate

SEC Update

The SEC recently filed a civil suit in federal district court against AT&T, Inc. charging the company with violating Regulation FD in 2016 by selectively disclosing nonpublic financial estimates and results to sell-side analysts before the company issued its quarterly earnings release. The SEC alleges that the purpose of the disclosure was to “walk the analysts down” by inducing them to lower their revenue estimates for the first quarter so that the consensus revenue estimate would be in line with the revenue AT&T expected to report. The SEC also charged three members of the company’s investor relations department who participated in the analyst calls with aiding and abetting the company’s violation.

AT&T is contesting the SEC’s allegations. In a public statement, the company disputes the SEC’s claim that the information conveyed to the analysts constituted material nonpublic information and contends that the action, brought five years after the alleged violation, “represents a significant departure from the SEC’s own long-standing Regulation FD enforcement policy.”

The company’s decision to oppose the action may result in a fuller exposition of the circumstances that led to the charges. The enforcement position reflected in the SEC’s complaint, however, merits careful attention now by companies and the officials authorized to act on their behalf in disclosures subject to Regulation FD.

You can view the SEC’s complaint here and AT&T’s public statement here.

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Authored by Alan Dye (co-editor), Richard Parrino (co-editor), John Beckman, and Ann Kim

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