On November 22, 2011, the SEC announced a settlement regarding Regulation FD violation allegations. Regulation FD prohibits the selective disclosure of material, non-public information to securities market professionals or holders of the issuer's securities who may well trade on the basis of the information.
On May 17, 2011, the company disclosed to the trustee that it would be redeeming a class of its trust preferred securities for $25 per share. At the time, the securities were trading for about $26.50 per share. The trustee for the company gave notice of the redemption to the Depository Trust Company (DTC) who informed member banks and brokers and nonmember subscribers on May 17, 2011. However, the company did not file a public notice of redemption until it learned of the impact that the selective disclosure regarding the redemption had on the market. The company did not file a Form 8-K publicly disclosing the redemption until May 18, 2011.
The SEC charged that in effecting the redemption, the company selectively disclosed, in violation of Regulation FD, that it would redeem a class of its trust-preferred securities for $25 per share. The SEC stated that the information that the company disclosed through the Trustee and DTC, but not initially to the public, was material information regarding these securities. The SEC noted that it would be important to a reasonable investor that a security trading at about $26.50 was to be redeemed in 30 days for about $25. Further, the Regulation FD adopting release specifically provides that a redemption is material information.
