Enforcement Action Shows SEC Will Not Tolerate Attempts To Circumvent Regulation FD

Wilson Sonsini Goodrich & Rosati
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On October 21, 2010, the Securities and Exchange Commission (SEC) announced enforcement actions against Office Depot and two of its executives for violating Regulation Fair Disclosure (Regulation FD) by selectively communicating to analysts and institutional investors that the company would not meet analysts’ earnings estimates. The enforcement actions were settled, with Office Depot agreeing to pay a $1 million penalty and each of the executives—the company’s CEO and then-CFO—agreeing to pay $50,000. At the same time, Office Depot settled unrelated accounting claims.

The SEC’s enforcement action charging violations of Regulation FD, the first in a little over a year, serves as a useful reminder that the SEC is determined to combat selective disclosure of material information and that it will not tolerate clever efforts to circumvent the rule.

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