On March 5, 2021, the Securities and Exchange Commission announced charges that were brought in the US District Court for the Southern District of New York, against AT&T Inc. for repeated Regulation FD violations, while charging three AT&T executives with aiding and abetting these violations, for their willful disclosure of material nonpublic information to a select group of research analysts. Regulation FD prohibits disclosures by issuers or persons acting on their behalf from selectively providing material nonpublic guidance to securities analysts, without disclosing the same information to the public – a Commission rule designed to promote investor confidence in the integrity of capital markets.
According to the complaint, in early 2016, AT&T and the three executives learned of a steeper-than-expected decline in smartphone sales that would cause its first quarter revenues to fall short of analysts’ estimates. As a result, the three executives made private, direct phone calls to analysts at approximately 20 separate firms, to share data related to internal smartphone sales and its impact on internal revenue metrics, in an attempt to avoid falling short of consensus revenue estimates for the third consecutive quarter. These material disclosures caused analysts to substantially adjust their revenue forecasts, resulting in reduced consensus revenue estimates that fell just below the level that AT&T eventually reported to public in a securities filing April 2016.
In its complaint, the SEC has requested permanent injunctive relief and civil monetary penalties against each defendant.