The selective and early disclosure of material non-public information resulted in a Securities and Exchange Commission cease and desist order and civil penalties against the former head of investor relations at First Solar, Inc. (First Solar or the Company), an Arizona-based solar energy company. The SEC determined that Lawrence D. Polizzotto violated Section 13(a) of the Securities Exchange Act of 1934 and Regulation FD by informing certain analysts and investors ahead of the market that First Solar would likely not receive an important and much anticipated loan guarantee commitment of nearly $2 billion from the US Department of Energy (DOE). The day after those disclosures, the Company publicly disclosed this information in a press release, causing its stock price to dip six percent.
On September 13, 2011, First Solar’s then-CEO publicly expressed confidence at an investor conference that the Company would receive three loan guarantees of close to $4.5 billion, which the DOE previously committed to granting upon satisfaction of certain conditions. Polizzotto and several other First Solar executives learned a couple of days later that the Company would not receive the largest of the three guarantees. An in-house lawyer expressly advised a group of First Solar employees, including Polizzotto, that they could not answer questions from analysts and investors until the Company both received official notice from the DOE and issued a press release or posted an update on the guarantee to its website. According to the SEC, notwithstanding this instruction, Polizzotto and a subordinate, acting at Polizzotto’s direction, had one-on-one phone conversations with approximately 30 sell-side analysts and institutional investors prior to First Solar’s public disclosure. In the conversations, they conveyed the low probability that First Solar would receive one of the three guarantees. In some instances, Polizzotto went further and said that a conservative investor should assume that the guarantee would not be granted.
Polizzotto agreed to pay $50,000 to settle the charges without admitting or denying any of the SEC’s findings. He, however, was not subject to even a temporary industry bar. The SEC did not bring an enforcement action against First Solar due to the Company’s cooperation with the investigation, as well as its self-disclosure to the SEC promptly after discovering Polizzotto’s selective disclosure. In addition, the SEC emphasized the strong “environment of compliance” at the Company, including the “use of a disclosure committee that focused on compliance with Regulation FD” and the fact that the Company took remedial measures to address improper conduct, including conducting additional compliance training.
In the Matter of Lawrence D. Polizzotto, File No. 3-15458 (Sept. 6, 2013).
