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August 10, 2020

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SEC Announced Charges for Regulation FD Violations

On August 20, the Securities and Exchange Commission announced it had charged Florida-based TherapeuticsMD Inc. with Regulation FD violations stemming from alleged sharing of material non-public information with research analysts without also publicly disclosing the information, in what appears to be the first such Regulation FD enforcement case brought by the SEC in the last six years.

Regulation FD generally prohibits public companies, or persons acting on their behalf, from selectively disclosing material, nonpublic information to certain covered persons, including institutional investors, securities analysts and other securities professionals. Under Regulation FD, material, nonpublic information may not be disclosed to these covered persons unless the information is contemporaneously disclosed to the public.

The SEC alleged two instances of selective disclosure of material information in violation of Regulation FD relating to the company’s interactions with the FDA. First, in June 2017, the company publicly disclosed it was holding meetings with the FDA about a new drug approval but also sent a separate, private message to research analysts in which the meetings were further described as “very positive and productive.” The following day, the company’s stock price closed up 19.4 percent, on heavy trading volume. Similarly, the following month, the company provided additional details to analysts via email about supplemental information submitted to the FDA. This information was not publicly disclosed.

Importantly, the SEC’s order found that, at the time of these disclosures, the company did not have policies or procedures in place regarding compliance with Regulation FD.

TherapeuticsMD consented to the SEC’s order, without admitting or denying the findings and agreed to pay a $200,000 penalty.

This enforcement action serves as a reminder that public companies should ensure that their corporate policies include appropriate procedures for the dissemination of material information and interactions with analysts, in compliance with Regulation FD, and that company personnel are properly trained as to compliance with these policies.

Additional information on the SEC’s order is available here.

©2020 Katten Muchin Rosenman LLPNational Law Review, Volume IX, Number 235


About this Author

Mark Reyes Securities Lawyer Katten Muchin law firm Chicago office

Mark J. Reyes concentrates his practice in corporate and securities matters, including representing issuers and investors in public offerings and private placements of equity and debt securities and advising clients in complex corporate transactions such as mergers, acquisitions, private investments in public equity (PIPEs), private equity investments and joint ventures. He also counsels public companies on securities law compliance, disclosures and corporate governance matters.

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Mark D. Wood, corporate securities lawyer Katten Muchin Chicago Law firm

Mark D. Wood is head of Katten's Securities practice and concentrates in corporate and securities law. Mark represents public companies, issuers and investment banks in initial public offerings (IPOs) and other public offerings, private investment in public equity (PIPE) transactions, debt securities and other securities matters.

Mark also represents clients in complex corporate transactions, including tender offers, mergers, acquisitions, dispositions, going-private transactions, private equity investments, joint ventures and strategic alliances.  He is a leading practitioner in representing investors, public companies and placement agencies in private investment in public equity (PIPE) transactions. In addition, he also counsels public companies on securities law compliance, disclosures, corporate governance and compensation-related issues. Many of his clients are middle market and upper middle market companies in the technology, oil and gas, manufacturing, health care and commercial banking industries.

Brian Hecht Corporate Lawyer Katten

Brian Hecht is a Corporate partner in Katten's New York office. He offers broad transactional experience in capital markets transactions, mergers and acquisitions and corporate governance matters. Within capital markets, Brian's practice focuses on initial public offerings, high yield offerings, spin-offs, tender offers and investment grade debt offerings. Within mergers and acquisitions, he represents private equity funds and public companies in both public and private acquisitions and divestitures.

Prior to joining Katten, Brian was a...