Judge George Daniels of the U.S. District Court of Manhattan said in his ruling that the case brought against Siebel by the Securities and Exchange Commission in 2004 lacked sufficient evidence that company executives purposefully shared certain corporate information with select groups of investors.
The SEC had maintained in its case that Siebel Chief Financial Officer Kenneth Goldman and Senior Vice President Mark Hanson breached the government's Regulation FD, or fair disclosure, guideline when briefing investors at several private events in 2003. Regulation FD requires that companies publicly distribute all material information made available to investors.
The SEC charged that by offering details on Siebel's expected sales performance for the first and second fiscal quarters of 2003 at the events, the executives had given an unfair advantage to the investors who were present. The SEC also claimed that by not filing required documents detailing the information presented by Goldman and Hanson, Siebel was again in violation of Regulation FD.
Siebel representatives labeled the dismissal a victory for all public companies.
"It is clear, based on the court's ruling today, that Siebel Systems did not violate the spirit or letter of Regulation FD," Siebel Counsel Kathleen Sullivan said in a statement. "We contested the SEC's claims in order to exonerate the company and its executives and to bring clarity to an important issue that was mishandled by the regulators. This was a win not only for Siebel but for all public companies trying to do the right thing."
At the investor meetings, Goldman and Hanson had characterized Siebel's outlook as improving, statements the SEC said "materially contrasted" earlier remarks made by Chairman Tom Siebel, who had indicated the company's earnings were challenged by the slowed U.S. economy. The company defended Goldman and Hanson's remarks, saying they were actually similar to the outlook offered by Siebel in his calls with investors, as the chairman had said the company's performance would improve if the economy rebounded, not that the negative outcome was a certainty.
The judge agreed with Siebel's contention that the SEC case put too much responsibility in the hands of executives to choose their words explicitly. In his ruling, Daniels wrote that "Regulation FD was never intended to be utilized in the manner attempted by the SEC under these circumstances."
The judge said further that a proposed extension of Regulation FD that would require even more stringent controls over the manner in which company officials disclose information could have a "chilling effect" on the extent to which executives are allowed to communicate with investors.