On August 20, 2019, the U.S. Securities and Exchange Commission (SEC) issued a cease-and-desist order against TherapeuticsMD, a pharmaceutical company, finding that it violated Regulation FD and Exchange Act Section 13(a), and ordered the company to pay a civil money penalty of $200,000. It is unclear at this time whether this case signals a renewed focus by the SEC on Regulation FD compliance or merely provided a set of facts so egregious that the SEC had to take action. Either way, it serves as a good reminder of the importance of having a robust Regulation FD compliance program.

On two occasions in June and July 2017, TherapeuticsMD communicated privately via email and phone with several sell-side analysts, sharing information about an important meeting and follow-up communications that it had with the FDA regarding one of its new drug applications. At the time of these communications, TherapeuticsMD had only two drugs in development under FDA review.

Following the first round of sell-side analyst communications in June 2017, TherapeuticsMD's stock traded up nearly 21 percent on heavy volume, prompting a call from a market watch official from the New York Stock Exchange. According to the SEC order, the TherapeuticsMD executives who responded to the market watch official were unaware of the communications with the sell-side analysts and thus informed the official that they were not aware of any material information affecting the stock.

Following the second round of sell-side analyst communications in the early morning hours of July 17, 2017, TherapeuticsMD's stock rebounded from an approximately 16 percent decline to just a 6.6 percent decline by market close. The full scope of information that had been shared with the sell-side analysts was not publicly disclosed until TherapeuticsMD's earnings call on August 3, 2017. The SEC noted that at the time of these selective disclosures with sell-side analysts, TherapeuticsMD did not have policies and procedures in place for external communications and Regulation FD compliance nor did it have Regulation FD training for its employees.

While the results of this case are not surprising, this order serves as an important reminder of the necessity of having strong disclosure controls, including: (i) establishing a disclosure committee; (ii) implementing and following a robust set of policies and procedures for external communications, including earnings releases, press releases, and analyst meetings; and (iii) providing Regulation FD training for employees, including executives and investor relations employees.