OCEG

In a recent litigation release, the SEC explains the resolution of a Reg FD matter. For the first time ever (at least in my memory), the SEC chose to charge the individual vs. the company AND the individual. Particularly interesting is the reminder at the end of the realease about the importance of a corporate compliance program and cooperation with enforcement agencies.

More info.

On September 24, 2009, the Securities and Exchange Commission filed a civil action against Christopher A. Black (Black), the former chief financial officer of American Commercial Lines, Inc. (ACL), a Delaware marine transportation and manufacturing company headquartered in Jeffersonville, Indiana.

In its complaint, the Commission alleged that Black aided and abetted ACL's violation of Regulation FD -- that Black, while acting in his capacity as the company's designated investor relations contact and without informing anyone at ACL, selectively disclosed material, nonpublic information regarding ACL's second quarter 2007 earnings forecast to a limited number of analysts without simultaneously making that information available to the public.

At the end of the release, the Commission articulated specific criteria (numbering mine) as to why the individual vs. company was charged:

In determining not to bring an enforcement action against ACL, the Commission considered several factors.

1. Prior to the June 16, 2007 disclosure by Black, ACL cultivated an environment of compliance by providing training regarding the requirements of Regulation FD and by adopting policies that implemented controls to prevent violations.
2. Further, Black alone was responsible for the violation and he acted outside the control systems established by ACL to prevent improper disclosures.
3. Moreover, once the illegal disclosure was discovered by ACL, it promptly and publicly disclosed the information by filing a Form 8-K with the Commission the same day.
4. In addition, ACL self-reported the conduct to the [SEC] staff the day after it was discovered and
5. the company provided extraordinary cooperation with the staff's investigation.
6. Finally, the company took remedial measures to address the improper conduct, including the adoption of additional controls to prevent such conduct in the future.

So to summarize:

1. Culture of compliance was evident because policies, controls and training were in place.
2. The perpetrator acted alone and outside of the control structures.
3. Once discovered, the company proptly and publicly disclosed the information via 8-K.
4. Once discovered, the company directly reported the conduct to SEC staff.
5. "Extraordinary Cooperation" was provided to the SEC staff (still no definition of what that really means though.
6. Company took remedial measures to prevent such conduct in the future.

Important reminders.