AT&T says the rule that excludes selective disclosures to analysts might not be construed to dam selective disclosures to analysts

Which information is “essential” according to securities law affects a very large gray area. Whether a publicly traded company is going to make or miss earnings estimates seems to be in the black pretty clearly, however: it’s the kind of thing investors watch for quarterly, after all, and one that usually does have some impact on a company’s stock price. And five years ago, AT&T was on the verge of missing out for the third year in a row. That the company was considering this material is evidenced by the need to do something to prevent it. It wasn’t that they generated additional $ 76 million in revenue, but instead called all of the analysts involved in AT&T and told them the as-yet-unpublished information that their earnings estimates were too high. A clearer example of the selective dissemination of material non-public information, which the FD regulation specifically prohibits, is hard to imagine unless you are apparently one of the analysts who receive this information or someone at AT&T who does does not work in the compliance department.

AT & T’s internal compliance materials state that smartphone-related revenue and sales figures are material and subject to FD regulation, the SEC’s court complaint said.

AT&T said smartphone sales were negligible to earnings as they were delivering wireless services rather than selling devices.

Analysts interviewed by the SEC as part of the investigation told regulators they did not believe the metrics were material and so did not report the AT&T notice to their own compliance experts, said a person familiar with the matter.

The analysts felt the metrics were material in some ways as they lowered their estimates for AT & T’s total revenue by an average of $ 323 million, which in a sense led to the information about the impending failure of the company’s were not material as it was no longer true. But that’s not the principle on which AT&T apparently wants to fight.

“The SEC’s pursuit of this matter will not protect investors and instead will only serve to cool productive communications between companies and analysts, which the SEC was concerned about when it passed the FD regulation some 20 years ago,” it wrote Companies. “Unfortunately, this case will only create a climate of uncertainty among public companies and the analysts who cover them.”

Unfortunately, “Something the SEC was concerned about when it passed an ordinance” is not the same as the ordinance itself. Whatever the SEC feared, it wrote that any dissemination of material non-public information to a limited group of people – For example, the 22 analysts who cover your company – accompanied by a press release or a television interview or a fleet of skywriters – another form of concurrent public disclosure that avoids the “non-public” bit. With that in mind, the SEC has to grapple with AT & T’s allegation, which is exactly what it feared 21 years ago.

“The FD regulation levels the playing field by requiring that issuers who disclose material information do so widely to the investing public, not just to select analysts,” said Richard R. Best, director of the SEC’s New York regional office. in a statement. “AT & T’s purported selective disclosure of material information on private phone calls to analysts is exactly the type of behavior that the FD Regulation seeks to prevent.”

SEC claims AT&T, 3 employees on Wall Street [WSJ]
AT&T is being sued by the SEC over information made available to analysts [Bloomberg]

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