Editor’s note: A previous version of this article indicated that Reg FD charges had been filed against American Commercial Lines. Instead, the former CFO of American Commercial Lines was charged. The Fool regrets this error.
Today's subject: According to a Reuters report, Energizer Holdings
Why we are indignant, and you should be, too: Regulation Fair Disclosure (Reg FD) was adopted by the SEC in August 2000 and is "aimed at curbing the selective disclosure of material nonpublic information by issuers to analysts and institutional investors." In other words, everybody, including you, gets the same information at the same time.
The Motley Fool played a prominent role in getting Reg FD adopted, and we hate to see it ignored. When one group of investors has information that another group doesn't, then the first group can take advantage of the situation, at the cost of the second. And that's just not right.
Over the years, there have been several SEC actions over Reg FD. In 2005, Flowserve
In the case of Energizer, CEO Ward Klein, CFO Daniel Sescleifer, and Vice President of Investor Relations Jacqueline Burwitz reportedly talked for 45 minutes with sell-side analysts, after the analysts received an email invitation to participate on the call. Clients of these analysts have or can be told the information. You and I do not.
That information about organic growth rates is certainly material and is still nonpublic. At least, I cannot find the information on the Energizer website or via a filing with the SEC. And there is apparently no recording of the conference call available.
While the stock price did not spike up the next day, Morgan Stanley did upgrade the company to "overweight" the following Monday, and the price jumped 3.8% that day, ahead of the S&P 500's 2.2% upward move.
What now: As you can imagine given our history with Reg FD, we are disappointed, even disgusted, particularly as Energizer was a recent pick for Motley Fool Stock Advisor. Maybe company executives were feeling pressure from analysts for more discussion, as they have traditionally not talked with analysts. But the way they appeared to handle it was, well, terrible. In the past, the SEC has fined both companies and executives involved in Reg FD violations, and I would not be surprised, given what's been reported, to see the same happen here.
Transparency, something we stress here, is of utmost importance. Part of that is making sure that everyone has the same information at the same time. Personally, I'm just glad that I don't have to decide whether to sell my shares of the company, because I don't have any. But if you do, consider whether you want to be invested in a company led by executives who cannot seem to remember Reg FD.
They should have just kept their mouths shut.