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Friday, October 21, 2011 12:45:42 AM
In addition, there is an obvious reticence on the part of most companies to comment on the process at all given that it involves the potential for litigation and any disclosure at all carries some risk. For a company to say anything BEYOND "We've filed a Wells Submission" would undoubtedly be frowned upon by the company attorneys and that statement alone doesn't make for much of a press release (or 8-K).
Absolutely. I agree with that 100%.
So no, I can't give you the requested example.....after a brief search anyway (I'm not entirely ready to admit that none exists). But my point was based on my understanding of the laws that might apply and not some example that I had in mind. And THAT I can provide:
Regulation FD (excerpts)
[excerpts omitted by Johnik, with a link at the end of the post to the regulation]
Yes, that regulation is an appropriate consideration, but I believe the central issue is one of materiality. In my opinion, the mere fact of a Wells submission, without knowing the content of the submission, is immaterial. I will of course concede that there is no bright line test for determining materiality, and there is thus an element of subjectivity (yet governed by objectivity). But I do not think that the existence of a Wells submission, standing alone, would significantly alter the information available to an investor on which to base an investment decision. Thus, at least in most circumstances, I would not think it would be material.
The materiality of the contents of the submission, of course, is an entirely different issue.
Obviously this law, as in many securities laws, carries with it some subjectivity.....especially here:
"under circumstances in which it is reasonably foreseeable that the person will purchase or sell the issuer's securities on the basis of the information."
Who could know whether the recipient of "kristina's" disclosure from the company's office, which I believe would qualify her as someone acting on the company's behalf, would be moved to buy shares? It's that subjectivity that led me to use the word "probably" in my post. On the other hand, had someone acting on the company's behalf told a shareholder that the company had decided NOT to file a Wells Submission, I don't think that it would be hard to argue that such a disclosure might move such a person to SELL shares. Subjective, right?
I recognize your point, but, as indicated above, I see the issue differently. Assume, for the sake of argument, that the "recipient" you have identified is an average investor, who is unknown to the company outside that capacity. Then lets disregard my assessment above, and deem the fact of a Wells submission material. Under these circumstances, it really shouldn't matter whether the person disclosing the information actually knew whether or not the recipient of the information would be moved to buy shares. It should nonetheless be reasonably foreseeable that the disclosure of material information to this "average Joe" investor would result in the investor's purchase of shares (or sale in the case of negative information). "Subjectively innocent"? Perhaps, but the rule imposes an objective standard (i.e., reasonableness).
Again, though, I highly question the materiality. If you found out that there was a Wells submission, without knowing its contents, would you jump on the opportunity to buy shares? My guess is you would not. And if I were posed the same question, I would say that a Wells submission is nothing more than an unknown communication to the SEC, which may or may not be persuasive. Thus, I would not be persuaded one way or the other.
In any event, I believe the poster who sparked this concern of yours has stated that he was not, in fact, informed of a "Wells Submission." Please correct me if I am mistaken.
It's a theoretical argument. That said, I don't believe that my failure to provide an example in any way proves that the legal interpretation is invalid.
It is theoretical indeed. I agree. However, I believe the absence of any known case where the simple fact of a Wells submission was found to violate Regulation FD makes it more probable than not that, absent unique circumstances, it would not be considered a violation. If you discover such a case, I would be very interested to read it.
I do appreciate the thought you put into your reply. Cheers.
Regulation FD for the few that made it to the end of this post (congrats!): http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=fe408b58c5c209dd7618b3cfad374ab1&rgn=div5&view=text&node=17:3.0.1.1.4&idno=17
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