Siebel Wins Dismissal of SEC Suit

A federal judge Thursday dismissed the Securities and Exchange Commission’s lawsuit against Siebel Systems Inc., which had been accused of violating the federal “fair disclosure” regulation after its chief financial officer opined on the company’s performance at two private events.

The SEC had accused CFO Kenneth Goldman of tipping off institutional investors present at these events by characterizing the company’s performance as “good” or “better” and noting that there were $5-million deals in the San Mateo, Calif., software company’s pipeline.

If that information had not been previously disclosed to investors at large, it would have been a violation of Regulation Full Disclosure, adopted in 2000 to prevent companies from favoring some investors with inside information to the detriment of others.

However, U.S. District Judge George Daniels said the SEC had parsed Goldman’s 2003 statements “at an extremely heightened level,” and although Siebel stock had moved substantially after Goldman’s comments, his statements were essentially the same as those offered by the company’s chief executive in a public conference call a few weeks earlier.

“Regulation FD was never intended to be utilized in the manner attempted by the SEC under these circumstances,” Daniels wrote in dismissing the SEC’s case. “Applying Regulation FD in an overly aggressive manner cannot effectively encourage full and complete public disclosure of facts reasonably deemed relevant to investment decision-making.”

The SEC had no comment.

A lawyer for Siebel, John C. Dwyer of Cooley Godward in Palo Alto, called the ruling “a complete victory” for the company and a hedge against overzealous enforcement of the regulation. “This is the first time that a court has provided some guidance to the SEC as to the parameters of their enforcement prerogatives,” Dwyer said.

The case was the first Regulation Full Disclosure case brought to court.