AT&T broke US law in scheme to beat revenue forecast, SEC lawsuit says

AT&T's logo and stock price displayed on a monitor on the floor of the New York Stock Exchange in January 2019.

Enlarge / AT&T’s logo and share price displayed on a monitor at the New York Stock Exchange on Tuesday, Jan. 22, 2019. (credit: Getty Images | Bloomberg)

The Securities and Exchange Commission has sued AT&T and three AT&T executives, saying the wireless carrier leaked nonpublic data about falling phone sales to analysts in order to convince the analysts to change their revenue forecasts. This scheme helped AT&T “beat” analysts’ revenue forecasts in the first quarter of 2016, the SEC said.

The complaint, filed Friday in US District Court for the Southern District of New York, alleges that AT&T repeatedly violated the Securities Exchange Act and the SEC’s Regulation FD (for “fair disclosure“) in March and April of 2016. The regulation “prohibit[s] selective disclosures by issuers of material nonpublic information to securities analysts,” the SEC lawsuit said. AT&T executives “disclosed AT&T’s internal smartphone sales data and the impact of that data on internal revenue metrics, despite the fact that internal documents specifically informed Investor Relations personnel that AT&T’s revenue and sales of smartphones were types of information generally considered ‘material’ to AT&T investors, and therefore prohibited from selective disclosure under Regulation FD,” the SEC said in a press release about its complaint.

AT&T claimed in a response Friday that “there was no disclosure of material nonpublic information and no violation” and said it will fight the lawsuit. AT&T also said that the SEC “spen[t] four years investigating this matter,” but no charges were brought during the Trump administration. The lawsuit was filed about six weeks after President Biden appointed Democrat Allison Lee as acting chair for the SEC; although the SEC is an independent agency, its commissioners and chair are appointed by the president.

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