AT&T to pay $6.25 million to settle claims it tipped off wall street

AP
AP

Summary

  • SEC accused company of sharing nonpublic financial metrics with analysts

AT&T Inc. will pay $6.25 million to settle a lawsuit filed by regulators that alleged it gave nonpublic financial information to analysts who then lowered their estimates, allowing the company to beat sales expectations.

The telecom company agreed to pay the fine and settle the Securities and Exchange Commission’s litigation without admitting or denying wrongdoing, according to a court filing. Three AT&T investor-relations executives each agreed to pay $25,000 individually to end the lawsuit, records show.

The federal judge in the case, Paul A. Engelmayer, in September denied motions by the SEC and AT&T to deliver an early verdict, although he wrote that the SEC’s evidence was “formidable." The case could have gone to trial but the two sides settled the lawsuit, which the SEC filed in Manhattan federal court in March 2021.

A spokesman for AT&T said the company is “committed to following all applicable laws and pleased to have resolution with the SEC."

The SEC alleged that AT&T and the executives violated a rule known as Regulation Fair Disclosure in March and April 2016. The rule forbids public companies from selectively disclosing material nonpublic information to market participants—such as stock analysts or shareholders—who could trade on the information.

Regulators alleged the executives shared nonpublic sales information with 20 analysts who covered the company and periodically issued estimates for AT&T’s financial performance. The executives wanted to “walk the analysts down," or guide their quarterly estimates lower because the AT&T employees knew quarterly consolidated gross revenue would come in lower than the market expected.

The analysts “promptly" adjusted their revenue estimates, the SEC alleged, resulting in a lowered consensus estimate, which AT&T beat when it announced earnings in April 2016.

“The actions allegedly taken by AT&T executives to avoid falling short of analysts’ projections are precisely the type of conduct Regulation FD was designed to prevent," SEC Enforcement Director Gurbir Grewal said in a statement Monday. “Regulation FD ensures that issuers publicly disclose material information to the entire market and not just to select analysts."

AT&T and the executives had denied during the litigation disclosing internal company metrics and argued that any information they shared wasn’t material to shareholders.

This story has been published from a wire agency feed without modifications to the text

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