Recent SEC Enforcement of Regulation FD: Presstek, Inc.

The Securities and Exchange Commission continues to signal its renewed focus on the enforcement of Regulation FD, which prohibits selective disclosure of material nonpublic information to investment professionals or holders of a company's securities. In March 2010, the SEC brought an enforcement action under Regulation FD against Presstek, Inc. and its former chief executive officer, Edward J. Marino, for signaling disappointing quarterly results during a telephone conversation between the CEO and an investment advisor. Given the SEC's renewal of its Regulation FD enforcement efforts, public companies should continue to monitor their compliance policies to prevent Regulation FD violations, and maintain a process for prompt corrective action should a violation occur.

SEC v. Presstek, Inc.

On March 9, 2010, the SEC filed a civil injunctive action against Presstek, Inc. and its former chief executive officer, Edward J. Marino, for violations of Regulation FD. Marino was one of three executives authorized by Presstek to speak on its behalf to investors, analysts and other securities professionals. According to the SEC's complaint, Marino was aware of Presstek's internal policy concerning periods of "corporate silence," generally beginning on the 15th day of the last month of each quarter, that precluded discussion of nonpublic company information with outside parties. The complaint stated that Marino received a call from an investment advisor two days before the end of the company's third quarter and he negatively commented on the company's thirdquarter performance. According to the notes taken by the advisor, Marino stated that "summer [was] not as vibrant as expected in North America and Europe," and that Presstek's third-quarter performance was "overall a mixed picture." During the call the advisor sent a message to his colleague indicating that the information he was receiving from Marino "sounds like a disaster," and immediately following the call he instructed his firm's trader to sell all of its Presstek holdings. That day, Presstek's stock price dropped 19 percent. The following day, Presstek issued a press release announcing that its results for the third quarter would be below prior estimates, and its stock price closed down an additional 10 percent.

Presstek agreed to settle the SEC's charges by consenting to an order enjoining the company from future violations of Regulation FD and directing it to pay a $400,000 civil penalty. In...