AT&T Settles SEC Charge of Selectively Disclosing Material Information to Wall St. Analysts
The Commission announced today that AT&T agreed to pay a $6.25 million penalty, with three company executives agreeing to pay $25,000 each, in connection with charges brought in March 2021 regarding the company’s selective disclosure of material nonpublic information to research analysts in violation of Regulation FD and Section 13(a) of the Securities Exchange Act of 1934. AT&T agreed to pay the largest penalty ever in a Regulation FD case.
According to the SEC’s complaint, AT&T discovered in March 2016 that a steeper-than-expected decline in first-quarter smartphone sales would cause the company’s revenue to fall short of analysts’ expectations for the quarter. According to the complaint, the company’s investor relations executives Christopher Womack, Michael Black, and Kent Evans made private, one-on-one phone calls to analysts at approximately 20 different firms in order to avoid falling short of consensus revenue expectations for the third consecutive quarter.
On these calls, the company’s executives allegedly disclosed AT&T’s internal smartphone sales data and the impact of that data on internal revenue metrics, despite internal documents specifically informing investor relations personnel that AT&T’s revenue and smartphone sales were types of information generally considered “material” to AT&T investors and thus prohibited from selective disclosure under Regulation FD.
The complaint also claims that the nonpublic information provided on these private calls caused analysts to significantly lower their revenue forecasts, allowing AT&T to ultimately beat the overall consensus revenue estimate when the company reported its results to the public on April 26, 2016.
The alleged actions taken by AT&T executives to avoid falling short of analyst projections are exactly the type of conduct that Regulation FD was designed to prevent,” said Gurbir S. Grewal, Director of the SEC‘s Division of Enforcement. “Compliance with Regulation FD ensures that issuers publicly disclose material information to the entire market, rather than just a select group of analysts.
The defendants, without admitting or denying the allegations in the complaint, consented to final judgments permanently enjoining them from violating, or aiding and abetting violations of, Regulation FD and Section 13(a) of the Securities Exchange Act of 1934, and ordering them to pay the above-referenced penalties.
The SEC’s New York Regional Office’s David Zetlin-Jones, Thomas Peirce, and George N. Stepaniuk led the investigation. Alexander M. Vasilescu, Victor Suthammanont, Mr. Zetlin-Jones, Joy Guo, and Amy Mayer handled the SEC’s litigation. Thomas P. Smith, Jr. oversaw the case.
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