SEC Enforcement Action Under Regulation FD For Implicit Communications To Selected Analysts

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On October 21, 2010, the Securities and Exchange Commission announced enforcement actions against Office Depot, Inc. and two executive officers for violating Regulation FD by selectively conveying to analysts and institutional investors that Office Depot would not meet analysts' earnings estimates.

The Violation

According to the SEC complaint, Office Depot's CEO and then-CFO were concerned that analyst estimates for the then current quarter were too high. They considered issuing a press release to provide the company's lower internal guidance, but were concerned because internal estimates were incomplete at that point. Instead, they directed employees to conduct one-on-one calls with analysts designed to cause analysts to revise their estimates downward by referring to recent public statements of comparable companies that cautioned of the slowing economy?s impact on earnings. The CFO assisted in preparing the following talking points for the calls...

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