AT&T and Investor Relations Officers Settle SEC Charges of Selective Disclosure With Record $6.25M Fine

On Monday, the Securities and Exchange Commission (SEC) announced that AT&T has agreed to pay a $6.25 million penalty and three company executives have agreed to pay $25,000 each to resolve charges brought in 2021 over the company’s selective disclosure of material non-public information to research analysts to avoid market disappointment in violation of SEC Regulation FD. According to the agency’s press release, the penalty is the largest ever in a Regulation FD case.

The SEC’s complaint alleged that in March and April of 2016, AT&T, aided and abetted by Christopher Womack, Kent Evans, and Michael Black, executives in its Investor Relations department, took unlawful actions to avoid falling short of financial analysts’ projections.

Reportedly, the executives learned of a more severe than expected drop in smartphone sales that would cause AT&T to fall short of analysts’ first quarter 2016 revenue estimates. Indeed, the company would record a record low rate at which existing customers purchased new smartphones, the SEC alleged, ultimately causing AT&T’s consolidated gross revenue to fall more than $1 billion below the analysts’ “consensus estimate.”

Fearing a third consecutive “revenue miss,” high-ranking officers instructed AT&T’s Investor Relations personnel to speak to analysts on a one-by-one basis with the goal of inducing them to reduce their individual estimates. Private calls with Wall Street analysts from approximately 20 firms resulted in various reductions, the SEC said, allowing AT&T to beat the overall consensus revenue estimate when it reported its results to the public in April 2016.

According to the SEC, the defendants’ actions violated Regulation FD, a requirement that issuers publicly disclose material information to the entire market and not just to select analysts.

Without admitting or denying the allegations, the defendants consented to judgments permanently enjoining them from violating the law and ordering them to pay the aforementioned penalties.

AT&T is represented by Norton Fullbright Rose US LLP and Willkie Farr and Gallagher LLP.