SAN MATEO, CA: Siebel Systems is in jeopardy of becoming the first company to be cited twice for Reg FD violations.
The business-software company recently informed investors that it had once again fallen under SEC scrutiny for alleged violations of Reg FD, after an article on CBSMarketWatch.
com reported that a private dinner between some Siebel executives - including CFO Ken Goldman - and a select group of analysts and investors was followed by an unexplained 7.5% jump in the company's share price, as well as trading volume that exceeded the shares' average by nearly four times.
Siebel is not commenting on the probe.
Adopted in 2000 by the SEC, Reg FD was designed to eliminate the practice of so called "selective disclosure." The rule requires a public company to release any information about its business in a manner that allows the general public access to the information at the same time as large institutional investors and analysts.
Three days after the company announced it was being investigated, Siebel sent an e-mail to institutional investors and analysts titled, "A Change in Siebel Investor Relations Policy."
In the e-mail, the company said it "will not be conducting one-on-one investor meetings at any of the upcoming financial events as a result of the latest SEC inquiry of Siebel Systems." It also said it would continue "to participate in these financial conferences and other investor events as long as the sessions are being [completely] webcast!"
The company, founded by Tom Siebel, is a market leader in business and CRM software, posting revenues of $1.64 billion last year. In January, Siebel switched PR firms from Access Communications to PR.com.
The new SEC probe places Siebel in a particularly difficult situation, as the company was the first to agree to pay a fine to settle a case involving violations of the rule back in November. Siebel paid a $250,000 penalty.
At least one analyst indicated that if there proves to be a second violation, the company could face more drastic action.
"We believe that the SEC would feel obligated to levy a significant fine against Siebel to underscore the importance of complying with Reg FD," stated analyst Patrick Walravens of JMP Securities in a research note to his clients. "Secondly, we believe that a change of management is not unlikely" if the charges are proven true.
The charges may have also played a part in the company quickly scuttling its plans for an unorthodox annual shareholder meeting it had planned for mid-June. Originally, it had planned for the meeting to be on webcast only, with no live audience. However, the company abruptly announced that shareholders "who would like to attend are welcome to do so."