SEC Charges Former VP of Investor Relations with Violating Fair Disclosure Rules (with Bondi Comment)
The SEC charged Lawrence Polizzotto, former head of investor relations at Arizona-based solar energy company First Solar Inc., with violating Regulation FD ("Fair Disclosure"). The SEC alleges that Polizzotto violated Reg. FD when he indicated in phone conversations with analysts and investors that the company was less likely than the company's management had previously indicated to receive an anticipated loan guarantee from the U.S. Department of Energy.
Bondi Comment: The case illustrates the difficulty of managing a situation where an individual speaking with investors is aware of negative news that has not been fully disclosed. Anyone involved in such a situation must consult very carefully with counsel as to permitted statements to determine what (if anything) the spokesperson can say without either misleading investors by implicitly denying the negative news or improperly tipping them off as to its occurrence.More generally, this enforcement action also illustrates that corporate calls with analysts and investors, no matter how well scripted and well intentioned, sometimes can result in the selective disclosure of material, non-public information. Accordingly, it is important for companies to carefully monitor conversations with analysts and investors to evaluate, for purposes of Reg FD, whether anything was shared that has not been disclosed previously, so that the company can promptly (if unintentional) or simultaneously (if intentional) release an 8-K with that new, additional information.