Implicit "Signals" to Analysts Result in Regulation FD Liability

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The SEC’s settlement last week of another Regulation FD enforcement action – its third in the past 13 months – reinforces that management of public companies must avoid not only direct earnings-related or other disclosures that violate Regulation FD but also implicit “signals” that may have the same effect.1 In its most recent action, the SEC alleged that Office Depot, Inc. and its chief executive officer and former chief financial officer violated Regulation FD and Section 13(a) of the Securities Exchange Act of 1934, as amended, by selectively disclosing, albeit indirectly, to analysts and institutional investors that the company would not meet analysts’ earnings estimates.

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