Recently, the Securities and Exchange Commission (SEC) instituted cease-and-desist proceedings against Lawrence D. Polizzotto, former head of investor relations at First Solar, Inc., charging him with violating Section 13(a) of the Securities and Exchange Act of 1934 (Exchange Act) and Regulation FD, for selectively disclosing material nonpublic information to certain analysts and investors before public disclosure. Specifically, Polizzotto disclosed to approximately 20 sell-side analysts and institutional investors that First Solar would not receive anticipated loan guarantees from the United States Department of Energy and directed subordinates to make similar calls with talking points that Polizzotto provided. Polizzotto, without admitting or denying the findings, agreed to settle the SEC’s charges, consenting to a $50,000 civil penalty and cease-and-desist order.

According to the SEC’s press release announcing the charges and settlement, the SEC decided not to bring an enforcement action against First Solar due to the company’s “extraordinary cooperation” with the investigation and its Regulation FD compliance measures. The SEC expressly recognized that, prior to Polizzotto’s disclosure, First Solar “cultivated an environment of compliance” through the use of a disclosure committee that focused on compliance with Regulation FD. In addition, First Solar promptly issued a press release with the material information before the market opened the morning after it discovered Polizzotto’s selective disclosure and quickly self-reported the misconduct to the SEC. The SEC also acknowledged that First Solar undertook remedial measures to address the improper conduct, including by conducting additional Regulation FD training for employees responsible for public disclosure.

The SEC’s decision not to pursue an enforcement action against First Solar, based in part on First Solar’s Regulation FD remedial and proactive compliance measures, sends a reminder to companies to review their Regulation FD compliance policies and procedures. In undertaking such review, companies should update policies and procedures with the social media guidance set forth in the SEC’s April 2013 report on its Netflix investigation and ensure that policies and procedures address how to respond to inquiries from investors and market professionals. In addition, companies should require periodic Regulation FD training, reeducate responsible employees as appropriate, and institute measures of accountability for Regulation FD compliance. Finally, companies should consider a response plan, so they are prepared in the event a potential selective disclosure occurs.