The Securities and Exchange Commission has decided not to take any formal
enforcement action against Motorola Inc. for conduct that its investigation into the
company concluded was "inconsistent" with relatively new corporate FD (fair-disclosure) regulations.
Motorola, in combination with Scientific-Atlanta Inc., claims 85 percent to 90
percent of the digital-cable set-top market.
The regulations, adopted at the end of 2000, are intended to address "the
problem of ... disclosure of material nonpublic information to analysts,
institutional investors, or others, but not to the public."
According to the SEC, the conduct involved selective disclosure of nonpublic
information in a series of phone conversations between the director of investor
relations and selected analysts.
In those conversations, according to the SEC, a significant fall-off in sales
and orders in various Motorola categories was quantified for analysts when they
had not been for the general public. The public had been told only of a "general
weakness," while the analysts were told that sales and orders were off 25 percent
The SEC concluded that the disclosure had been inappropriate, but it was
mitigated by the fact that Motorola had sought advice from counsel prior to the
That advice turned out to be erroneous, but the SEC recognized its good-faith
effort and wants to encourage companies to seek counsel in such circumstances,
although with better advice than Motorola apparently got.
The commission's report made that clear, saying the company likely would not
escape a future enforcement action with the excuse of "reliance on counsel."
The SEC did take action against three other companies, including Raytheon Co., in
the first ever such penalties under the FD regulations.