A public company was fined and censured for selective disclosure (Regulation FD violations). A senior executive at the pharmaceutical company sent emails to sell-side analysts indicating positive meetings with the FDA about a drug approval, but the company did not more broadly disseminate the information within 24 hours. On a separate occasion, the company released an 8-K that did not include the full information shared with the analysts. Regulation FD prohibits public companies from selectively disclosing material, nonpublic information to third party securities professionals.
If this case augurs more SEC enforcement of Regulation FD, it could have a chilling effect on the information shared with buy-side asset managers, especially if the in-house lawyers and compliance personnel take an expansive view of what constitutes “material information.” Also, asset managers should think twice before acting on what could be selective disclosure or risk a charge for aiding and abetting.