SAN MATEO, CA: In a case that has been closely watched by the investor relations community, a US district court earlier this month dismissed the Securities and Exchange Commission's (SEC) lawsuit that said Siebel Systems violated Regulation Fair Disclosure.
From the beginning, the business-software company had promised to fight the allegations, arguing the charges violated Siebel's First Amendment right to free speech.
But the judge chose not to base his ruling on the free speech argument, instead finding that the SEC had been "overly aggressive" in its pursuit of the case.
The SEC charged that the company and two of its executives disclosed information to Wall Street at a meeting with financial analysts before giving that information to the public. That disclosure, the SEC argued, violated Reg FD, which prohibits public companies from divulging such information on a selective basis.
Lou Thompson, president and CEO of the National Investor Relations Institute, said that the ruling is a signal that the government should guard against overstepping its bounds.
"I think they will be more careful that they don't get into splitting hairs," he said.
Still, Thompson did not think it would negatively impact the fundamental premise of Reg FD and expressed skepticism at Siebel's attempt to make it an issue of free speech.
"Reg FD is deeply embedded in corporations' disclosure policies and their practices," he said. "I cannot see that the First Amendment would protect somebody [who was] selectively disclosing information that would give somebody an advantage over somebody else."
Siebel declined to comment beyond an issued statement.
"We contested the SEC's claims in order to exonerate the company and its executives, and to bring clarity to an important issue that was mishandled by the regulators," said Siebel counsel Kathleen Sullivan in the statement. "This was a win not only for Siebel, but for all public companies trying to do the right thing."
In June 2004, Siebel became the first company ever charged twice by the SEC under Reg FD.
In November 2002, Siebel paid a fine of $250,000 to the SEC after it accused Siebel of violating Reg FD when the company's CEO spoke at an investment-banking conference.