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.
Buster Hein is a freelance writer who lives in Phoenix, Arizona. Twitter: @bst3r.
7 responses to “Tim Cook’s Mad Money email might have violated SEC rules”
Chief compliance officer here. Christ. Everyone is parroting the same damn thing and no one knows WTF they are talking about. If Tim Cook received an email from Jim Cramer’s MSNBC email address he has reason to believe Jim is acting as a reporter and not an investor. Jim then circulates the information as news as provided by Tim Cook. Case closed. There is no issue. If Katie Couric conducted an interview with Tim Cook and he made some announcements to her about upcoming products that was not previously known, could Katie and her team not air the interview and profit from the information given? YES!!! Same goddamn thing. This is what happens when tech nerds grab a quote from 1 misinformed person without doing any research on SEC rules and regulations.
Tim emailed Cramer the information and I don’t believe it was in an “arranged interview”. I’m not an expert in the SEC rules, but Tim does have to watch himself. It’s not customary for a CEO to release quarterly information by an email.. Let’s put it this way, if the SEC is investigating, then they are investigating and until we hear what the results are, then we don’t know.
I just read another article on this matter. He has to give the information in an open manner, not a private email to an outsider. Whether or not the SEC is going to slap his wrist, fine him or do something more severe is unknown at this time, but he can’t just send out a private email giving some quarterly information to an outsider before the information is publicly released. Cramer has his own investment group aside from him being a TV personality discussing stocks/investments. I don’t think Tim discussed anything with Apple’s attorney’s before he sent the email. I don’t they they would have advised him to release such information in a private email.
Being the CEO of one the most valuable corporations does not automatically give him Carte Blanche. I’m sure he wasn’t trying to give insider information or do anything that had malice intent, etc. but rules are rules and the SEC has to investigate just like they would do if any CEO did the same thing. People have gone to jail for insider information violations, so it’s not to be taken lightly. I’m sure we’ll find out what the out come is fairly soon.
“Everyone (You) is (are) parroting the same damn thing and no one (you do not) know(s) WTF they (you) are talking about.”
This wasn’t “quarterly information”. All he said was that Apple is doing well. You make it sound like he told Jim exact Watch or iPhone sales numbers. Nothing will come of this. They’ll ask Jim about the email, he’ll say he didn’t act on the information for his own gain, and the SEC will go back to sitting on their asses. Tim didn’t say anything that anyone who follows the industry didn’t already know; he just confirmed it.
If there is a problem I think it stems from Jim Cramer being a reporter AND an investor, which gives him an advantage in both areas. That’s the grey area the SEC should be looking at.
I’m sure Tim is losing sleep over it.