Siebel Seeks Dismissal Over Disclosure Rule

Siebel Systems Inc., in the first legal challenge to the government’s fair-disclosure rule, said allegations that it gave market-moving information to selected investors should be dismissed because regulators have no enforcement authority.

Attorneys for Siebel Systems, the world’s largest maker of customer service software, were in U.S. District Court in New York on Tuesday to argue for dismissal of the accusations made by the Securities and Exchange Commission. It is the second time Siebel Systems, based in San Mateo, Calif., has run afoul of the SEC’s Regulation Fair Disclosure, which prohibits public companies from giving information to preferred investors.

“There’s a serious question whether Congress authorized this regulation,” said Kathleen M. Sullivan, attorney for Siebel. “The government cannot make up a policy without express delegation from Congress.”

The SEC argued that it has authority to enforce the rule as part of its power to require companies to update investors about important news.

“We have a very wide authority,” SEC lawyer Treazure Johnson told U.S. District Judge George Daniels. Daniels said he would issue his decision in two to three months.

Seibel shares fell 18 cents to $8.75 on Nasdaq.