Risk & Compliance

Reg FD Unfair, Says Chamber of Commerce

The business group maintains that ''in punishing companies for selectively disclosing 'material and nonpublic' information, Regulation FD impairs f...
Stephen TaubJanuary 21, 2005

The U.S. Chamber of Commerce has filed a friend-of-the-court brief in support of Siebel Systems, which is fighting accusations by the Securities and Exchange Commission that it violated Regulation Fair Disclosure, according to The Wall Street Journal.

Last June the SEC alleged that Siebel chief financial officer Kenneth Goldman disclosed material nonpublic information during two private events he attended with former investor relations director Mark Hanson on April 30, 2003, in New York: a one-on-one meeting with an institutional investor and an invitation-only dinner hosted by Morgan Stanley.

When Siebel was charged by the SEC last year — Goldman and Hanson were also charged with aiding and abetting the violations — it became the first company accused by the commission of violating Reg FD for a second time. Siebel is also the first company to fight the charges, noted the Journal.

In its brief filed last year, Siebel argued that “the commission conveniently ignores the U.S. Supreme Court’s admonition that a selective disclosure rule — like Regulation FD — must have ‘explicit’ Congressional authorization.” The company also asserted that Reg FD violates the First Amendment, which covers the right to truthful speech, and lacks the clarity required in the Fifth Amendment, which ensures “both fair warning and the prevention of arbitrary and discriminatory enforcement.”

The Chamber of Commerce echoed those assertions, writing that “in punishing companies for selectively disclosing ‘material and nonpublic’ information, Regulation FD impairs fundamental First Amendment values,” according to The Wall Street Journal. “It either compels corporate executives to engage in unwanted discourse with the public at large, thereby inhibiting their right to freedom of speech and association, or causes them to restrict their speech altogether to avoid violation of the regulation.”

The business group is also opposed to the SEC’s proposed proxy access rule, which seeks to allow certain large investors to nominate directors of companies under specific circumstances, and it is challenging the SEC’s authority to require that 75 percent of mutual-fund directors to be independent, noted the Journal.

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