SEC v. Siebel

384 F.Supp.2d 694 (2005)

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Nature of the Case

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Facts

Regulation FD requires an issuer, to make public material information disclosed to security market professionals or holders of the issuer's securities who are reasonably likely to trade on the basis of that information. Where the issuer's selective disclosure of material nonpublic information is intentional, the issuer is to simultaneously make public disclosure. In the case of non-intentional disclosure, public disclosure must be promptly made. ‘Promptly’ means as soon as reasonably practicable (but in no event after the later of 24 hours or the commencement of the next day's trading on the New York Stock Exchange) after a senior official of the issuer, learns that there has been a non-intentional disclosure by the issuer or person acting on behalf of the issuer of information that the senior official knows, or is reckless in not knowing, is both material and nonpublic.” An “issuer” is defined as “one that has a class of securities registered under Section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 781), or is required to file reports under Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(d))”17 C.F.R. § 243.101(b). Regulation FD also applies to any person acting on an issuer's behalf which includes any senior official of the issuer. 17 C.F.R. § 243.101(c). Goldman made positive comments about D's business activity levels and sales transaction pipeline at two private events. P alleges that, at these two events, Mr. Goldman privately disclosed material nonpublic information by stating that D's activity levels were “good” or “better,” that new deals were coming back into the pipeline, that the pipeline was “building” and “growing,” and that “there were some $5 million deals in Ds pipeline.” P alleges that immediately following the disclosure of this information or soon thereafter, certain attendants of the meetings and their associates made substantial purchases of shares of D's stock. P alleges that Goldman communicated to his private audiences that D's business was improving as the result of new business and that the increase in the Company's guidance for the second quarter was not simply because deals that had slipped from the first quarter were closing.” P claims that these statements materially contrasted with public statements made by Thomas Siebel during conference calls on April 4th and 23rd, and at an April 28th conference. Siebel's statements were negative and that there were no indications that the existing poor economic conditions were improving. P contends that “based on these disclosures, the total mix of information available to investors was that D's business had performed poorly in the first quarter and would improve in the second quarter only if the economy improved.” Goldman's statements were significantly more positive and upbeat and were not linked to or conditioned upon the performance of the economy. P alleges that when the analysts repeatedly inquired about the impact of the slipped deals on D's second-quarter guidance, Mr. Siebel “avoided,” “evaded,” and “directly declined to answer the question.” P also alleges that D failed to file the requisite Form 8-K disclosing the material nonpublic information that Mr. Goldman had disclosed at the private meetings within the time frame specified by the SEC's rules, nor did it “disseminate that information through another method of disclosure reasonably designed to provide broad, non-exclusionary distribution of the information to the public.”