SEC Charges AT&T and Three Executives with Regulation FD Violations

On March 5, 2021, the U.S. Securities and Exchange Commission announced it charged AT&T, Inc. and three of its investor relations executives with selectively disclosing material nonpublic information to research analysts in violation of Regulation FD. The SEC’s complaint alleges that to avoid falling short of the consensus revenue estimates for the third consecutive quarter, AT&T investor relations executives made private, one-on-one phone calls to analysts at several firms.  According to the complaint, on these calls, the executives disclosed internal smartphone sales data and the impact of that data on internal revenue metrics. The complaint alleges that internal company documents provided that revenue and sales of smartphones were types of information generally considered “material” to investors, and therefore prohibited from selective disclosure under Regulation FD. The complaint further alleges that as a result of what they were told on these calls, the analysts substantially reduced their revenue forecasts, leading to the overall consensus revenue estimate falling to just below the level that AT&T publicly reported on April 26, 2016.

At this point, the SEC’s allegations are unproven and it is unclear whether this claim will be settled and what type of penalties (if any) AT&T will face. The charges reinforce the SEC’s commitment to ensuring issuers disclose material information to the investing public and not selectively to analysts.

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