This year, the SEC has brought renewed enforcement focus to Regulation FD, which prohibits selective disclosure of material, nonpublic information. In September, the SEC settled a civil action against Christopher A. Black, the former chief financial officer of American Commercial Lines, Inc. (ACL), a marine transportation and manufacturing company. The complaint alleged that the CFO disclosed material, nonpublic information regarding the company’s earnings forecast to a select group of analysts in violation of the company’s compliance policies.

The Commission’s enforcement action is noteworthy for two reasons. First, this was the first Regulation FD enforcement action by the SEC since September 2007. Second, for the first time since the adoption of Regulation FD in 2000, the SEC decided to bring an enforcement action against an officer responsible for improper conduct without naming the company as a defendant in the action.

SEC v. Christopher A. Black

According to the SEC’s complaint, ACL’s CFO sent an e-mail from his home on Saturday, June 16, 2007 to the eight sell-side analysts who covered the company. In the e-mail, the CFO stated that he wanted to provide “some additional color” regarding the earnings guidance announced in the company’s press release of June 11, 2007. Specifically, he explained that the company expected the second quarter EPS to be “a dime below that of the first quarter.” This was in contrast to ACL’s press release from earlier in the week, which stated that ACL’s expectation for the second quarter was similar to its first quarter results. Since ACL’s first quarter EPS was $0.20, the CFO’s e-mail advised the analysts that ACL’s second quarter results would be half of what it had publicly disclosed.

The complaint also stated that after ACL issued the press release, ACL’s CEO and CFO traveled together to meet with analysts who covered the company. Upon their return, the CFO proposed to send an e-mail to all analysts summarizing the information discussed in their meetings since they had not had an opportunity to meet with all analysts as a single group. The CEO agreed and asked the CFO to send the e-mail by close of business on Friday, June 15, 2007. According to the CEO, he also directed the CFO to provide a draft of the e-mail to outside counsel prior to sending it. The CFO was unable to finalize the e-mail on Friday. Sometime before the CFO left the office on Friday, however, he received an updated internal analysis indicating that ACL’s second quarter EPS could be as low as $0.13, substantially lower than ACL’s projections announced in the press release just four days earlier. On Saturday, the CFO sent an e-mail to the analysts advising significantly lower figures for the second quarter than had previously been disclosed in the press release, without first providing it to anyone else at ACL or to outside counsel.

On the following Monday, the first trading day after the CFO’s e-mail, ACL’s stock price dropped precipitously. Upon discovering the CFO’s e-mail on Monday morning, ACL publicly disclosed the content of the CFO’s e-mail by filing a Form 8-K the same day. At the end of the trading day, ACL’s stock price had dropped 9.7 percent and the trading volume in ACL had increased nearly 300 percent from the average daily trading volume in ACL’s stock up to that point in the month of June.

Without admitting or denying the allegations in the complaint, the CFO consented to the entry of a final judgment requiring him to pay $25,000 in civil penalties. He also consented to a cease-and-desist order in the SEC’s administrative proceeding.

SEC Does Not Pursue Company

In deciding not to bring an enforcement action against ACL, the SEC considered the following factors:

  • Internal Controls. ACL had cultivated an environment of compliance by providing training on Regulation FD requirements and implementing controls to prevent violations.
  • An Individual’s Deviation. The CFO alone was responsible for the violation and he acted outside the control systems established by ACL to prevent improper disclosures.
  • Filing of Form 8-K. Once the selective disclosure was discovered by ACL, the company promptly and publicly disclosed the information by filing on the same day a Form 8-K.
  • Self-Reporting. ACL reported its conduct to the SEC’s staff the day after it was discovered, and the company provided extraordinary cooperation with the staff’s investigation.
  • Remedial Measures. ACL took measures to address the improper conduct, including the adoption of additional controls to prevent similar conduct in the future.

The Commission’s decision to exclude ACL as a defendant shows that the SEC chose to view the improper conduct in context. By considering the CFO’s actions against a backdrop of ACL’s “environment of compliance,” as well as ACL’s response to the violation, the SEC concluded that this was a case of a key officer’s deviation from an otherwise strong and well-established compliance system.


The SEC’s enforcement action underscores the importance of having in place internal controls and compliance policies to prevent violations of Regulation FD. It also highlights that taking prompt remedial actions to address the violation may be critical in dissuading the SEC from imposing penalties on a company.