AT&T's $6.25 Million Fine Shows How Regulation FD Polices Analyst Tips

In March 2016, three AT&T investor relations executives learned that first-quarter smartphone sales would fall short of analyst expectations. Rather than wait for public earnings season, they called analysts at approximately 20 separate firms and shared the company's internal sales data and revenue impact in private conversations. The goal was to help analysts adjust their forecasts before AT&T's public earnings announcement on April 26, 2016.

That private outreach became a textbook violation of the SEC's Regulation FD, or Fair Disclosure rule. The commission sued, and AT&T ultimately paid a record $6.25 million penalty—the largest settlement in a Regulation FD case at that time. The settlement illustrates how the 25-year-old rule polices the boundary between boardroom information and public market access, and why an offhand comment on an earnings call or a social media post can trigger enforcement.

What the Fair Disclosure rule requires

The SEC adopted Regulation FD on August 10, 2000, and it took effect on October 23, 2000. The rule emerged from what the SEC saw as a systemic problem: public companies routinely shared material nonpublic information—such as earnings forecasts, sales data, or product delays—with securities analysts and institutional investors before releasing that same information to the general public.

Regulation FD created a simple mandate: when a company discloses material nonpublic information to certain groups, it must also disclose that information to the public. The timing depends on whether the disclosure was intentional or accidental. If a company intentionally tells an analyst something material, it must release that information to the public simultaneously. If an executive lets something slip unintentionally—an offhand remark on a call, or a loose comment to a journalist—the company has roughly 24 hours or must disclose at the start of the next trading day.

Material nonpublic information means facts that a reasonable investor would consider important in deciding whether to buy or sell the company's stock. AT&T's internal documents specified that revenue and smartphone sales figures fell into this category. DraftKings' sales growth in key operating regions qualified as material when the company had not yet announced quarterly results.

How to disclose: the channels that count

Companies have several ways to comply. They can file a Form 8-K, the SEC's current-events report form. They can issue a press release through a wire service. They can hold an open conference call or webcast with public notice. What they cannot do is selectively share information with analysts or institutional investors and assume that private disclosures satisfy the rule.

For decades, this meant that companies had to be disciplined about earnings calls, analyst briefings, and one-on-one meetings with major investors. A stray remark about a product delay, a casual mention of cost pressures, or a passing comment about market conditions could constitute a violation if the audience included people likely to trade on it.

The rule's reach expanded in recent years as disclosure moved to social media. When DraftKings' public relations firm posted on the CEO's personal X and LinkedIn accounts on July 27, 2023, stating that the company continued to see "really strong growth" in certain states, that post reached investors who could trade on the information before the company's formal Q2 2023 earnings announcement seven days later. The SEC treated the social media posts as a selective disclosure, and DraftKings paid $200,000 to settle charges in September 2024.

What triggers an enforcement action

The AT&T case illustrates the mechanics of a violation. When AT&T's executives made their calls to analysts in March 2016, they disclosed information that was both material and nonpublic—internal smartphone sales data and its impact on revenue. The disclosure was intentional: the executives knew what they were telling analysts and did so by design, hoping analysts would adjust their forecasts downward before the earnings announcement. AT&T did not simultaneously disclose this information to the public.

The result was that analysts reduced their revenue forecasts based on information the public market did not yet have. When AT&T announced quarterly results on April 26, 2016, it beat the revised expectations the analysts had set, creating an appearance that the company had outperformed. The SEC viewed this as the harm Regulation FD was designed to prevent: some investors got a heads-up that allowed them to trade before others.

The DraftKings case shows that even brief, informal disclosures can cross the line. The posts on the CEO's social media accounts contained specific business information before the earnings release. DraftKings' public relations firm quickly deleted the posts at the company's request, but timing alone does not cure a Regulation FD violation; the violation occurred when the information went public selectively.

The enforcement gap: why private investors cannot sue

One structural feature limits Regulation FD's reach: private parties—individual investors or institutional investors—cannot bring lawsuits based solely on a Regulation FD violation. The SEC enforces the rule through civil actions. Investors harmed by selective disclosure cannot recover damages on the grounds that a company violated Fair Disclosure.

This means the SEC's enforcement appetite largely determines whether a violation leads to consequences. The AT&T settlement required the company to pay $6.25 million and three executives to pay $25,000 each, but these were negotiated outcomes where AT&T consented without admitting wrongdoing. The SEC's willingness to investigate and litigate determines whether violations result in charges.

Why companies now scrutinize communication channels

The DraftKings fine marked a shift in how the SEC evaluates selective disclosure. Social media accounts—even personal accounts run by executives—now count as potential disclosure channels if they communicate material corporate information. DraftKings' settlement required the company to train personnel with corporate communications responsibilities on Regulation FD compliance.

For many public companies, this has meant tighter controls. Investor relations departments now flag communications from executives to analysts, journalists, and institutional investors. Some restrict which company officials can speak to analysts. Others require pre-approved scripts for earnings calls and investor meetings. The goal is simple: prevent the accidental release of material nonpublic information to some parties while others remain in the dark.

The rule's text does not distinguish between a floor call in a boardroom and a social media post. If information is material and nonpublic, and some investors can see it before others, Regulation FD applies. Companies that treat social media as merely informal commentary have discovered that the SEC disagrees.

Related coverage: Form 10-K, Form 10-Q, and the Optional Form 10-S: What public companies report, and when; How SEC Rule 10b5-1 Lets Executives Trade Their Own Stock Legally.