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SEC Probe Spurs New Analyst Meeting Policy at Siebel
The decision comes on the heels of Siebel's disclosure that on Friday it had received an inquiry from the SEC regarding a possible violation of Regulation Fair Disclosure.
Posted May 14, 2003
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Following an inquiry into a possible second violation of a Security and Exchange Commission rule banning selective disclosure of information, Siebel Systems announced on Monday it will stop having individual meetings with investors. In a written statement the company said: "Siebel will not be conducting one-on-one investor meetings at any of the upcoming financial events as a result of the latest SEC inquiry of Siebel Systems. Siebel is happy to participate in these financial conferences and other investor events as long as the sessions (i.e., presentations, question-and-answer breakouts, other investor meetings, etc.) are being Web cast." The decision comes on the heels of Siebel's disclosure that on Friday it had received an inquiry from the SEC regarding a possible violation of Regulation Fair Disclosure (Reg FD), which was enacted two years ago to prohibit public companies from selectively releasing material information that might move the market. The most recent SEC's action stemmed from an article on CBS MarketWatch that reported Siebel shares gained 8 percent on twice the average volume for the past 50 days on the heels of an April 30 dinner meeting in New York City. At the dinner meeting Siebel CFO Ken Goldman spoke to some financial analysts and investors. On May 1, the day after the meeting, Siebel shares rose 68 cents, or 7.5 percent to $9.66 on volume that was nearly four times normal. Two days after the private meeting between analysts and Goldman, Siebel Executive Vice President David Schmaier sold nearly 34 percent of his shares in Siebel. Schmaier grossed $1.9 million when he sold 200,000 shares of Siebel at $9.68 a share on May 2, according to documents filed with the SEC. Schmaier still holds 379,4222 Siebel shares, according to the SEC. Normally the relatively large transaction would have gone through in an unremarkable fashion. However, because the SEC is looking into that meeting in New York, the transaction also caught the eye of the SEC. Schmaier sold his shares privately and notified the SEC of the transaction. A Siebel spokesman says Schmaier was not aware of the meeting, and that the meeting did not include the disclosure of any information that was not already publicly available.
This is the second time Siebel has dealt with the SEC in relation to a Reg FD case. The first instance was in November 2002, when Siebel became the first company to agree to pay a fine related to a Reg FD case. That action followed a claim that Siebel founder and CEO Tom Siebel disclosed information to attendees of an invitation-only technology conference hosted by Goldman Sachs on November 5, 2001. Siebel's stock gained 27 percent in a rally that topped out on November 14, 2001. Under terms of the settlement, Siebel paid $250,000, admitted no wrongdoing, and pledged not to selectively disclose information in the future. Analysts say that if Siebel has indeed violated Reg FD again, there would likely be serious repercussions. JMP Securities analyst Pat Walravens says in a client note that the SEC would likely feel obliged to levy a significant fines against the company to underscore the importance of complying with Reg FD. "Given that Siebel Systems has over $2 billion in cash, we believe the fine would need to be an order of magnitude greater than the $250,000 fine that Siebel paid in connection with the SEC's first investigation," Walravens says. Walravens also says a second violation could lead to management changes at Siebel. Siebel, which is conducting its own internal investigation, declined to comment further.
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