There is a possibility that Apple CEO Tim Cook violated the regulation fair disclosure (Regulation FD) of the Securities and Exchange Commission (SEC) after sending an e-mail to CNBC’s Jim Cramer regarding the update of the company’s performance in China.
SEC will likely investigate Tim Cook’s e-mail
In an interview with Market Watch, Thomas Gorman, a partner at the law firm Dorsey and Whitney said the Commission will likely investigate Tim Cook’s email to Cramer and find out the context of the disclosure. “The SEC will undoubtedly want to take a look at this,” said Gorman.
Bill Singer, a lawyer and owner of BrokerAndBroker.com also believed that the SEC will look into the situation and determine whether Tim Cook disregarded the Regulation FD.
Singer said, “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.
Under the Regulation FD, public companies or individuals acting on its behalf must disclose material information to the public simultaneously to prevent selective disclosure where some investors receive market moving information ahead of others.
On April 2, 2013, the SEC issued a clarification indicating that companies using social media to disclose information to investors comply with Regulation FD. The companies must notify investors about which social media will be used to disseminate information.
Tim Cook’s email to Cramer was read on air at CNBC, and it was also tweeted by its reported Carl Quintanilla. Although Regulation FD exempts the media, Cramer co-manages the portfolio Action Alerts Plus, which has a long position in Apple based on a recent disclosure on TheStreet.
Apple remains strong in China
In his e-mail to Cramer, Tim Cook emphasized that they rarely provide mid-quarter updates and make comments on the movement of Apple stock. According to him, he understood that Cramer’s inquiry is “on the minds of many investors.”
Tim Cook said he received daily updates on the company’s performance in China and emphasized that Apple continued to experience strong growth in the country from July to August. According to him, “Growth in iPhone activations has actually accelerated over the past few weeks.” He added that the company’s App Store in China achieved the best performance of the year during the past two weeks.
