The reasons given by the SEC for not bringing an enforcement action against First Solar provide some comfort to companies and their management that the SEC will consider (1) efforts designed to ensure compliance with securities laws and (2) the steps taken by a company when non-compliance is discovered. According to the SEC's press release: "Prior to Polizzotto’s selective disclosure on September 21, First Solar cultivated an environment of compliance through the use of a disclosure committee that focused on compliance with Regulation FD. The company immediately discovered Polizzotto’s selective disclosure and promptly issued a press release the next morning before the market opened. First Solar then quickly self-reported the misconduct to the SEC. Concurrent with the SEC’s investigation, First Solar undertook remedial measures to address the improper conduct. For example, the company conducted additional Regulation FD training for employees responsible for public disclosure."
Below is a summary of the facts of the matter according to the SEC’s order:
- Polizzotto attended an investor conference on September 13, 2011, with First Solar’s then-CEO, who publicly expressed confidence that the company would receive three loan guarantees totaling approximately $4.5 billion.
- Two days later, Polizzotto and several other executives learned that the company would not be receiving at least one of the loan guarantees.
- A group of employees began discussing how and when the company should publicly disclose the loss of the loan guarantee and a company lawyer noted the company “would not have to issue a press release [but the company would] be restricted by Regulation FD in…answering questions asked by analysts, investors, etc. until such time that [the company does] issue a press release.”
- On September 21, 2011, despite knowing that the company had not yet publicly disclosed anything, Polizzotto drafted several talking points that emphasized the high probability of receiving two of the loan guarantees and the low probability of receiving the third. Polizzotto delivered these talking points in one-on-one calls with analysts and institutional investors, and he directed a subordinate to do the same.