Apple stock plummeted Monday morning before Tim Cook stepped in by emailing Mad Money‘s Jim Cramer to reassure investors that all is well for Apple in China. The move quickly turned Apple’s stock price around, but Cook might have violated Securities and Exchange Commission rules in the process.
Cook’s unusual mid-quarter update might have fallen afoul of the SEC’s Regulation FD rule, according to white-collar lawyers who spoke with MarketWatch. The SEC bars publicly traded companies from sharing info with someone who could potentially profit from it. There’s usually an exception for media; however, Cramer also co-manages a portfolio called Action Alerts PLUS that has a long position in Apple.
“The SEC will undoubtedly want to take a look at this,” Thomas Gorman, a partner at the law firm Dorsey & Whitney, told MarketWatch. A huge fine might not be imminent, but the SEC will at least contact Apple to seek context on the disclosure.
In his email, Cook told Cramer that Apple “has continued to experience strong growth for our business in China through July and August,” and that iPhone activations have been at an all-time high the last two weeks.
The SEC’s rule on how companies disclose nonpublic information to individuals is fairly murky and is often contested by companies, especially in the age of social media. Cook’s email to Cramer was read publicly on air and tweeted by CNBC reporter Carl Quintanilla. The SEC will probably want to know when the Mad Money host received the email, and how much time passed before it was read aloud on air.
