SEC V. Siebel Systems, Inc.: Comment on the SEC's Failed Enforcement of Regulation Fair Disclosure in Federal Court
2006; Volume: 32; Issue: 1 Linguagem: Inglês
ISSN
0360-795X
Autores Tópico(s)Securities Regulation and Market Practices
ResumoI. INTRODUCTION 161 II. BACKGROUND: REGULATION FAIR DISCLOSURE 163 A. Reasons for Adopting Regulation Fair Disclosure 163 B. Regulation FD and Disclosure Process 164 C. Material and Nonpublic Information 164 D. Complaints about Regulation FD 166 III. v. SIEBEL SYSTEMS, INC. 166 A. Case Background 166 1. April 2003 Communications with Public 166 2. Private Meetings of April 30 and sec Complaint 168 3. Siebel's Motion to Dismiss 168 B. Dismissing case 169 C. The Substance of sec's Complaint 171 IV. ANALYSIS 173 A. The Second Circuit's View of Rule 12(b)(6) 173 B. The Merits of sec's Regulation FD Claim 174 V. RECOMMENDATION 176 VI. CONCLUSION 177 I. INTRODUCTION On April 30, 2003, two executives of Systems, Inc.1 (Siebel or Siebel Systems), Chief Financial Officer Kenneth A. Goldman and Mark D. Hanson, head of Siebel's investor relations, attended two private events in New York City.2 During these functions, two men discussed future prospects for their company's growth. At first event, Siebel's officers attended a one-on-one meeting with Alliance, an institutional investor.3 After meeting, Goldman and Hanson attended a dinner hosted by Morgan Stanley. Attendance at this event required an invitation. The guest list included approximately six institutional investors and a number of Morgan Stanley research and institutional sales personnel.4 The nature of these events led many observers to conclude that had selectively disclosed important information hi order to bolster its standing with these members of investment industry. The hosts of these private events determined who attended. Neither nor its hosts provided any access to media or provisions for webcasting proceedings.5 Even though insisted that it had not conveyed any new information to attendees, media speculation to contrary quickly arose.6 The day after private meetings, price of stock rose nearly eight percent.7 Additionally, stock traded on volume of around twenty-five million shares, almost four times level of day before and twice its average volume of previous fifty days.8 Several attendees of private meetings purchased stock. [W]ithin roughly four trading hours after Goldman and Hanson met with Alliance representatives, Alliance converted its 108,200 share short position in stock into a 114,200 share long position[,] ... a net change of 222,400 shares.9 Given this market activity, it appeared that company's executives had provided important information to its private hosts. With all makings of a blatant violation of Regulation Fair Disclosure (Regulation FD), securities and Exchange Commission (the SEC or the Commission) began an investigation within two weeks of incident.10 This Comment discusses Regulation FD in context of its first application in federal district court. Following an overview of Regulation FD in Part II, Part III analyzes facts from which sec's claim arose. Part III also discusses basis for Siebel's motion to dismiss case and sec's arguments in favor of continued litigation. After summarizing district court's opinion in v. Systems, Inc., Part IV discusses district court's interpretation of Federal Rule of Civil Procedure 12(b)(6) and effects of this interpretation. Finally, this Comment analyzes district court's dismissal of case and public policy that supports district court's decision. …
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