Thursday, September 24, 2009
The SEC settled charges against Christopher A. Black (Black), the former chief financial officer of American Commercial Lines, Inc. (ACL), a Delaware marine transportation and manufacturing company. The SEC alleged that Black, while acting in his capacity as the company's designated investor relations contact and without informing anyone at ACL, selectively disclosed material, nonpublic information regarding ACL's second quarter 2007 earnings forecast to a limited number of analysts without simultaneously making that information available to the public. As a consequence, according to the SEC, Black aided and abetted ACL's violation of Regulation FD and Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act). Without admitting or denying the allegations in the complaint, Black consented to the entry of a final judgment requiring him to pay a $25,000 penalty.
More specifically, the complaint alleged that on Monday, June 11, 2007, ACL issued a press release projecting second quarter earnings in line with ACL's first quarter earnings of approximately $.20 per share. The complaint further alleges that on Saturday, June 16, 2007, Black sent an e-mail from his home to the eight sell-side analysts who covered the company. In addition, the complaint alleges that Black's e-mail stated that ACL's earnings per share for the second quarter "will likely be in the neighborhood of about a dime below that of the first quarter," effectively cutting in half ACL's second quarter earnings guidance. The complaint also alleged that Black's selective disclosure and resulting analysts' reports triggered a significant drop in ACL's stock price. Lastly, the complaint alleged that on Monday, June 18, the first trading day after Black's e-mail to analysts, ACL's stock price dropped 9.7% on unusually heavy volume.
Black also consented to the entry of an order in a follow-on administrative proceeding directing him to cease and desist from violating Regulation FD and Section 13(a) of the Securities Exchange Act of 1934.
In determining not to bring an enforcement action against ACL, the Commission considered several factors. Prior to the June 16, 2007 disclosure by Black, ACL cultivated an environment of compliance by providing training regarding the requirements of Regulation FD and by adopting policies that implemented controls to prevent violations. Further, Black alone was responsible for the violation and he acted outside the control systems established by ACL to prevent improper disclosures. Moreover, once the illegal disclosure was discovered by ACL, it promptly and publicly disclosed the information by filing a Form 8-K with the Commission the same day. In addition, ACL self-reported the conduct to the staff the day after it was discovered and the company provided extraordinary cooperation with the staff's investigation. Finally, the company took remedial measures to address the improper conduct, including the adoption of additional controls to prevent such conduct in the future.