The SEC announced last week that it charged the former head of investor relations of First Solar Inc. with violating Regulation FD when he tipped off analysts and investors in multiple one-on-one telephone conversations that the company was unlikely to receive an important U.S. Department of Energy loan guarantee. The former IR officer settled (without admitting or denying the findings) by paying a $50,000 penalty. Interestingly, the company was not charged. There are at least two important takeaways from this announcement.

Regulation FD remains alive and well.

This first point should come as no surprise since these types of enforcement actions pop up with some regularity. And the SEC’s findings indicate that the former officer had been specifically advised not to disclose the information until the company issued a press release or posted it to its web site. So, this was a particularly egregious violation of standard procedure for most public companies. Still, it doesn’t hurt to be reminded that these things happen from time to time and that you cannot be too careful or too diligent in policing your public communications. A tight, well-disseminated, frequently reinforced communications policy remains essential for every public company.

An environment of compliance is more than just nice to have.

This second point is perhaps more important. The SEC went out of its way to say that it did not charge First Solar itself because prior to the selective disclosure it had “cultivated an environment of compliance.” The SEC noted that the company:

  • Had a disclosure committee that focused on Regulation FD;
  • Immediately discovered the former officer’s selective disclosure (indicating that not only were disclosure controls in place, but that they actually worked);
  • Issued a press release the next morning before the market opened (indicating that it takes compliance seriously);
  • Quickly self-reported to the SEC; and
  • Undertook remedial measures concurrent with the SEC’s investigation by, among other things, providing additional Regulation FD training for its employees.

It seems to me that, despite its disclosure stumble, First Solar actually came out of this smelling like a rose. Also, their example provides an excellent roadmap for how (and how quickly) to react if you ever find yourself in a similar situation.