“Apple Inc. CEO Tim Cook’s decision to give a rare mid-quarter update on the company’s performance in a private email to CNBC’s Jim Cramer on Monday may have violated federal disclosure rules, lawyers said Monday,” Jennifer Booton reports for MarketWatch. “In the email, confirmed by Apple to MarketWatch, Cook said that iPhone activations have accelerated over the last few weeks, despite growing economic concerns in China and the government’s moves to devalue the Yuan. He also said Apple’s App Store recorded the best performance of the year in China during that time.”
“The private disclosure, which was tweeted out by CNBC reporter Carl Quintanilla and then read on air at CNBC, may have violated the Securities and Exchange Commission’s Fair Disclosure regulation, white-collar lawyers told MarketWatch,” Booton reports. “The rule, deemed murky and often contested by companies, addresses how publicly-traded companies disclose material non-public information to certain individuals or entities. ‘The SEC will undoubtedly want to take a look at this,’ said Thomas Gorman, a partner at Dorsey focusing on defending SEC and other regulatory investigations. At the very least, the SEC will contact Apple to seek context for the disclosure, he said.”
Booton reports, “In 2013, the SEC ruled that companies could make public disclosures on social media platforms such as Facebook Inc. and Twitter Inc.”
Read more in the full article here.
MacDailyNews Take: Technically, one can see how Jim Cramer, as the email recipient, was afforded a trading advantage no other Apple shareholders received in kind. Insider trading is the trading of a public company’s stock by individuals with access to nonpublic information about the company – which Cramer had from the minute he read the email until it was released by CNBC.
One might expect that Cramer would anticipate possible movement in AAPL after the public release of the email. Now, Cramer no longer trades stocks from his own funds, but does have a charitable trust that continues to buy and sell stocks. Therefore, his charitable trust could have benefitted for the information provided by Apple’s CEO. Of course, Cramer’s charitable trust could have not traded AAPL, which would eliminate any insider trading issue, we assume. Also, one could claim that Cramer is an analyst or a journalist, so would that remove any issues of impropriety?
One would expect that Cook ran this email by Apple lawyers first, but far stranger mistakes have happened, so we’ll have to wait and see if any issues actually materialize from this.
Bottom line: Even if no trades were made using this information, we’re left wondering how is this not a Regulation Fair Disclosure violation?
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