A pedestrian walks in front of an AT&T location in New York.
Scott Mlyn | CNBC
The Securities and Exchange Commission accused AT&T and three of its executives of selectively giving some Wall Street analysts access to non-public information without sharing it widely.
The SEC alleged in a new complaint Friday that in March 2016, AT&T learned that its revenue would be lower than analysts’ estimates due to a larger-than-expected drop in smartphone sales. first term. To keep it from falling far short of expectations, according to the SEC, AT&T Investor Relations executives Christopher Womack, Michael Black and Kent Evans called analysts to about 20 companies that revealed internal sales data and how it would affect revenue.
AT&T shares were slightly negative on Friday after trading hours.
The SEC stated that the internal documents made it clear that the data were generally considered important to investors and could not be disclosed selectively under the Fair Disclosure Regulation (FD Regulation). This regulation says that material information should be shared publicly when shared with certain market professionals and analysts to promote fair play.
As a result of these calls, according to the SEC, analysts lowered their revenue estimates. This meant that the consensus estimate ended just below the number AT&T eventually reported during the quarter, according to the complaint.
According to the complaint, AT&T is expected to fall more than $ 1 billion below the consensus revenue estimate for the quarter prior to executive calls. The complaint alleges that AT & T’s chief financial officer instructed the company’s investor relations department to “work” analysts who had “too high” team estimates.
The SEC claimed that Black misrepresented private call information with analysts as public. The complaint alleges: “Black recklessly knew or ignored that he was misrepresenting the information he passed on to analysts because he was following the calculation of AT & T’s consensus estimates, none of which matched the information he provided in calls to analysts. “.
In a lengthy statement following the complaint, AT&T said the lawsuit “represents a significant deviation from the SEC’s long-standing FD Regulation enforcement policy and is inconsistent with the testimony of all those involved in those talks.” “.
The company went on to say that the information discussed in the calls with analysts “referred to the widespread elimination of industry-wide subsidy programs for the purchase of new smartphones and the impact of this trend in smartphone upgrade rates and computer revenue. without device subsidies, customers updated their smartphones less frequently, resulting in a reduction in computer revenue. ” .
AT&T also said it had already publicly stated that declining phone sales had no material impact on earnings.
“The SEC’s pursuit of this issue will not protect investors and instead only serve to cool productive communications between companies and analysts, which was of concern to the SEC when it adopted the FD Regulation about 20 years ago.” said AT&T in the statement. “Unfortunately, this case will only create a climate of uncertainty between public companies and the analysts who cover them.”
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