Chamber Welcomes Victory in Siebel Systems Case

WASHINGTON, D.C. – The U.S. Chamber of Commerce welcomed the Southern District Federal Court of New York's decision to dismiss the SEC's lawsuit against Siebel Systems for allegedly violating the commission's regulation on full disclosure. The Chamber had filed an amicus brief in support of Siebel Systems.

"The court recognized that the SEC rule would have a chilling impact on corporate speech," said Robin Conrad, senior vice president of the Chamber's law firm, the National Chamber Litigation Center. "Lawsuits based on vague and general observations will overly restrict corporate speech and run counter to the purpose of the regulation: to promote disclosure."

The SEC had promoted the rule – called Reg FD – assuring the business community that the regulation would be enforced only in extreme cases. In this case, according to the court, the SEC behaved in just the opposite fashion.

Reg FD states that public companies cannot disclose material information to securities analysts and institutional investors without disclosing it publicly. The breadth of the regulation made it difficult for companies to predict what information would trigger disclosure duties, according to the Chamber. Rather than achieving transparency and openness, the rule would dampen release of information.

The SEC's approach "places an unreasonable burden on a company's management and spokespersons to become linguistic experts, or otherwise live in fear of violating Regulation FD should the words they use later be interpreted by the SEC as connoting even the slightest variance from the company's public statements," according to the court's ruling.

This is the second time a federal court has ruled against one of the SEC's regulations. Earlier this summer, the U.S. Court of Appeals for the D.C. Circuit ruled the SEC could not proceed with its rule to require independent chairmen at mutual funds.

The U.S. Chamber of Commerce is the world's largest business federation representing more than 3 million businesses and organizations of every size, sector and region.

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