A recent email that Tim Cook sent to CNBC analyst, Jim Cramer, could put the Apple CEO in a sticky situation with the Securities and Exchange Commission. In the email, Cook ended up revealing material information about Apple’s growth in China in an attempt to calm Wall Street fears that China’s continued economic slowdown would negatively impact Apple’s growth in the country. The Cupertino California company’s shares ended up opening the day under $100 but quickly rebounded throughout the day.
In his message, Cook wrote that Apple is continuing to see “strong growth” in China over the past two months and revealed that iPhone activations are accelerating alongside the Chinese App Store performing very well. Shortly afterwards, fellow CNBC anchor, Carl Quintanilla posted the email to Twitter and many began to question whether Cook had violated SEC Regulation FD. This regulation in particular prohibits publicly-traded companies from disclosing material company information privately without simultaneously releasing it publicly. It states the following:
The regulation provides that when an issuer, or person acting on its behalf, discloses material nonpublic information to certain enumerated persons (in general, securities market professionals and holders of the issuer's securities who may well trade on the basis of the information), it must make public disclosure of that information.
I certainly could see, in some circumstances, where the SEC would want to review the conduct and think it is a violation of Reg FD. It constitutes a disclosure giving certain individuals the benefit before it was percolated by the rest of the public, during a fast-moving, extraordinary market.
We’ll have to wait and see what happens, if anything.
Source: Carl Quintanilla (Twitter), MarketWatch, SEC
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