AT&T Makes $6M Reg FD Settlement

December 5, 2022

AT&T agreed to pay a $6.25 million penalty and three company executives agreed to pay $25,000 apiece stemming from charges brought in March 2021 related to the company’s selective disclosure of material nonpublic information to research analysts in violation of Regulation FD and Section 13(a) of the Securities Exchange Act of 1934. The penalty that AT&T agreed to pay is the largest ever in a Regulation FD case.

According to the SEC’s complaint, AT&T learned in March 2016 that a steeper-than-expected decline in its first quarter smartphone sales would cause AT&T’s revenue to fall short of analysts’ estimates for the quarter. The complaint alleges that, to avoid falling short of consensus revenue expectations for the third consecutive quarter, AT&T investor relations executives Christopher Womack, Michael Black, and Kent Evans made private, one-on-one phone calls to analysts at approximately 20 separate firms. On these calls, the AT&T executives allegedly disclosed AT&T’s internal smartphone sales data and the impact of that data on internal revenue metrics, even though, among other things, internal documents specifically informed investor relations personnel that AT&T’s revenue and sales of smartphones were types of information generally considered “material” to AT&T investors, and therefore prohibited from selective disclosure under Regulation FD. The complaint further alleges that the nonpublic information provided on these private calls caused analysts to substantially reduce their revenue forecasts, allowing AT&T ultimately to beat the overall consensus revenue estimate when AT&T reported its results to the public on April 26, 2016.

"The actions allegedly taken by AT&T executives to avoid falling short of analysts’ projections are precisely the type of conduct Regulation FD was designed to prevent," said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. "Compliance with Regulation FD ensures that issuers publicly disclose material information to the entire market and not just to select analysts."

The defendants, without admitting or denying the allegations in the complaint, consented to final judgments permanently enjoining them from violating, or aiding and abetting violations of, Regulation FD and Section 13(a) of the Securities Exchange Act of 1934, and ordering them to pay the above-referenced penalties.

The SEC’s investigation was conducted by David Zetlin-Jones, Thomas Peirce, and George N. Stepaniuk of the SEC’s New York Regional Office. The SEC’s litigation was conducted by Alexander M. Vasilescu, Victor Suthammanont, Mr. Zetlin-Jones, Joy Guo, and Amy Mayer. The case was supervised by Thomas P. Smith, Jr.