Recent Regulation FD Enforcement and Guidance

Originally published October 13, 2009

Keywords: Regulation FD, SEC, Christopher Black, selective disclosure, Compliance and Disclosure Interpretations

The US Securities and Exchange Commission recently brought a Regulation FD enforcement proceeding against Christopher A. Black, the former chief financial officer, and designated investor relations contact, of American Commercial Lines, Inc. (ACL), alleging that Mr. Black violated the SEC's rules prohibiting selective disclosure. In settlement of the proceeding, Mr. Black, without admitting or denying the SEC's allegations, agreed to pay a $25,000 penalty and consented to an order directing him to cease and desist from violating Regulation FD and Section 13(a) of the Securities Exchange Act of 1934. See the SEC's order 34-60715 (the "Order"), dated September 24, 2009, available at http://www.sec.gov/litigation/admin/2009/34-60715.pdf.

This case is notable in two respects. First, it demonstrates that the SEC does monitor compliance with Regulation FD, notwithstanding that the SEC has not initiated many Regulation FD actions recently. Second, and perhaps more significantly, the SEC did not commence enforcement proceedings against ACL; rather the SEC brought the action only against the corporate officer that the SEC believed had violated Regulation FD.

The SEC complaint alleged that on Monday, June 11, 2007, ACL issued a press release revising its prior annual earnings guidance for 2007, projecting annual earnings per share in the range of $1.45-1.65. The press release also included general earnings guidance for the second quarter of 2007, stating that the company expected the "2007 second quarter results to look similar to the first quarter." ACL's first quarter 2007 earnings per share were $0.20.

On Tuesday, June 12, 2007, through Thursday, June 14, 2007, Mr. Black and ACL's CEO traveled together to meet with analysts who covered the company. Upon their return, Mr. Black proposed to send an email to all of the analysts, summarizing the information that had been discussed in their meetings. ACL's CEO agreed, and asked for the email to be sent by the close of business on Friday, June 15, 2007. According to ACL's CEO, the CEO directed Mr. Black to provide a draft of the email to outside counsel before sending it.

Mr. Black was unable to finalize the email on Friday. Instead he sent it from his home on Saturday to just the eight sell-side analysts who covered the company. Mr. Black did not have...