I always feel like somebody’s watching me. . .

Issuers would be well-advised to take note of the SEC’s recently announced $200,000 settlement of an enforcement action brought against Florida-based TherapeuticsMD, Inc., less for the legal issues involved, which present a very straightforward application of Regulation FD, than as a reminder that regulators regularly review analysts’ reports and will not hesitate to investigate and prosecute apparent violations of disclosure rules.

The SEC’s enforcement action focused on two occasions during the summer of 2017 on which TherapeuticsMD executives provided non-public information to sell-side analysts regarding the status of the company’s efforts to achieve FDA approval for its then-leading drug candidate.  While the company’s stock price moved significantly in the wake of those disclosures and information from the disclosures quickly made its way into analyst reports, in each case, the company delayed public disclosure of the same information for several weeks.  At the time this was happening, the company did not have in place a Regulation FD disclosure policy.

Regulation FD prohibits the selective disclosure by public companies of material nonpublic information to designated market participants, including brokers and dealers, investment advisers, institutional investment managers and investment companies.  In order to comply with this provision, it’s vital that companies put in place robust external communications policies and procedures and provide regular training to employees.

In light of the announcement of this settlement, now would be an especially good time for public companies to review their external communications policies and procedures.

The SEC’s release regarding the settlement of the TherapeuticsMD enforcement action can be found here.

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