On September 6, 2013, the Securities and Exchange Commission (SEC) announced that it had brought—and settled—a cease-and-desist case under Regulation Fair Disclosure (Reg. FD), which requires that public companies broadly disclose material nonpublic information to the public that their covered officers and employees intentionally or inadvertently disclose to market professionals and stockholders. The SEC charged Lawrence D. Polizzotto, a former Vice President of Investor Relations at First Solar, Inc., with selectively disclosing that the company was unlikely to receive financing under a conditional loan from the Department of Energy. Mr. Polizzotto agreed to pay a $50,000 fine to settle the charges, although he did not admit or deny the findings.
According to the SEC order,  Mr. Polizzotto attended a September 13, 2011 investor conference with the company’s then-CEO, who “publicly expressed confidence” that First Solar would receive three loan guarantees of $4.5 billion from the Department of Energy. Several executives, including Mr. Polizzotto, learned a couple of days later that First Solar would not get at least one of the loan guarantees. The company began discussing how and when to publicly disclose this information. However, before the company issued a public announcement, a number of analysts and stockholders began contacting the company after the House Committee on Energy and Commerce sent a letter to the Department of Energy inquiring about its loan guarantee program and the status of the guarantees that had not yet closed, including all three of First Solar’s conditional guarantees. Even though the company had not yet issued its public announcement, Mr. Polizzotto and his subordinate had phone conversations with more than 30 analysts and investors. They used talking points on the calls that “effectively signaled” First Solar would not receive one of the loan guarantees. The SEC charged that these calls violated Reg. FD, which requires simultaneous public disclosure of material nonpublic information that is intentionally disclosed by covered corporate officers and company spokespersons to market professionals and stockholders.  In addition to the $50,000 penalty from the settlement of these charges, Mr. Polizzotto agreed to cease and desist from violating Reg. FD and Section 13(a) of the Securities and Exchange Act of 1934.
Significantly, the SEC did not bring any charges against the company, First Solar, based on several factors discussed in the SEC press release.  First, the company provided the SEC with “extraordinary cooperation” in the investigation. Second, prior to Mr. Polizzotto’s selective disclosure, “First Solar cultivated an environment of compliance through the use of a disclosure committee that focused on compliance with Regulation FD.” Third, when First Solar discovered the violation, they issued a press release with the nonpublic information the next morning, self-reported to the SEC, and took remedial measures, including Reg. FD training provided to all relevant employees.
This Reg. FD case is similar to others previously brought by the Commission. For example, in 2009, the SEC charged the Chief Financial Officer (CFO) of American Commercial Airlines, Inc. with separately emailing analysts that quarterly earnings would be worse than previously stated in a press release and analyst meeting.  The CFO was fined $25,000, although the company was not sanctioned because of its quick public release of the information, self-reporting to the SEC, strong Reg. FD compliance program, and cooperation with investigators.
These SEC cases highlight the need for companies to address Reg. FD in their compliance programs and to provide the proper training to appropriate personnel. Private discussions with market professionals and stockholders about business information can be risky, especially where there is a substantial likelihood that a reasonable person would consider that information important in making an investment decision or where the total mix of information can be significantly altered. Companies should have clear guidelines and procedures on how to quickly and broadly disseminate information when external developments require it, and those policies should include a “no comment” policy pending a Reg. FD-compliant disclosure. Finally, it is important to note the SEC’s favorable treatment of companies that take prompt corrective action when they discover an unauthorized and intentional FD violation.
 Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing Civil Penalties and a Cease-and-Desist Order, Exchange Act Release No. 70,337 (Sept. 6, 2013).
 For inadvertent disclosure, Reg. FD requires prompt public disclosure, i.e., “as soon as reasonably practicable (but in no event after the later of 24 hours or the commencement of the next day’s trading on the New York Stock Exchange”). 17 C.F.R. § 243.101(d).
 Press Release, Securities and Exchange Commission, SEC Charges Former Vice President of Investor Relations With Violating Fair Disclosure Rules (Sept. 6, 2013).
 Litigation Release, Securities and Exchange Commission, SEC Files Settled Regulation FD Charges Against Former Chief Financial Officer (Sept. 24, 2009).