Dive Brief:
- The Securities and Exchange Commission has charged AT&T with repeatedly violating Regulation FD of federal securities law by selectively disclosing material nonpublic information to research analysts.
- Three of the company's investor relations executives were personally charged with aiding and abetting the violations.
- "AT&T's alleged selective disclosure of material information in private phone calls with analysts is precisely the type of conduct Regulation FD was designed to prevent," said Richard Best, director of the SEC's New York regional office.
Dive Insight:
AT&T learned in March 2016 that a steeper-than-expected decline in its first quarter smartphone sales would cause the company's revenue to fall short of analysts' estimates for the quarter, the SEC said.
To avoid falling short, company investor relations executives Christopher Womack, Michael Black and Kent Evans made private, one-on-one phone calls to analysts at some 20 firms, allegedly to disclose AT&T's internal smartphone sales data and the impact of that data on internal revenue metrics.
Internal documents informed the executives that revenue and smartphone sales were the types of information generally considered material to AT&T investors, the SEC said, and therefore prohibited from selective disclosure.
As a result of the calls, analysts reduced their revenue forecasts. The new consensus revenue estimate fell to just below the level that AT&T reported to the public.
"Regulation FD levels the playing field by requiring that issuers disclosing material information do so broadly to the investing public, not just to select analysts," said Best.
The SEC's complaint seeks permanent injunctive relief and civil monetary penalties.
