Controlling the flow of insider information is a critical part of American securities law. However, many companies will experience situations where someone ends up disclosing information they shouldn't have.
Regardless of whether the disclosure was deliberate or accidental, you'll need to handle the problem judiciously. A securities law attorney will likely tell you to follow these four steps.
Ideally, a publicly-traded company will have at least one corporate lawyer on retainer. Contact this attorney and let them know the basics of the situation. Stick to what you know for sure. Rumors aren't worth much in these situations.
Collect basic information about the alleged disclosure. Write down the names of any people who had any contact with the insider. This includes the names of people who operate outside of the company because they may legally be insiders if they have market-moving information that hasn't passed the embargo period. If someone in charge of receiving blabbed to a supplier about a rollout, for example, the supplier is now part of the situation, too.
Whenever possible, try to capture contemporaneous versions of emails, texts, letters, and memos. Make printed copies and place them in a file. Restore the originals to their appropriate sources while maintaining good record-keeping practices. Lock any digital messages to reduce the risk of accidentally deleting them.
If people placed calls or conducted meetings, make notes of the times and places. Secure all logs, too. Likewise, try to include the names of everyone involved in those situations.
Identify the Nature of the Insider Information
Particularly, you will want to determine whether the information in question was truly insider information. Do not make this determination on your own. Speak with a securities law attorney. Frankly, if there is confusion about what happened, you're going to have a much easier defense if you can state categorically that you were acting on the advice of counsel.
Foremost, you should seek any evidence of whether the information was non-public. Secondly, find out what the embargo date range was for the information. Thirdly, determine if the information was in any way potentially market-moving. If the information doesn't fit all three criteria, the disclosure likely wasn't a violation of any securities laws.
Respond to All Government Inquiries
If the Securities and Exchange Commission takes an interest in what happened, you should be sure to document all contact from the agency. Pass letters on to your securities law attorney ASAP so they can help you decide how to respond. Keep your lawyer and the SEC in the loop, and do as your counsel advises while the process moves forward.
For more information, contact a securities law firm such as Carter & West Law.