The U.S. Securities and Exchange Commission (SEC) on Friday charged First Solar‘s former head of investor relations with breaking its fair disclosure rules.
Lawrence D Polizzotto, a former First Solar vice president agreed to settle the charges for US$50,000 without admitting or denying the charges and no enforcement action has been taken by the SEC because of the Tempe, Arizona-based solar company’s previous good record on fair disclosure.
The SEC order says Polizzotto revealed to at least 20 institutional investors and analysts over the phone that the company would not be receiving one of three loan guarantees from the U.S. Department of Energy.
When First Solar learned of the fair disclosure breach and issued a press release the following morning its share price dropped six per cent.
The SEC investigation, conducted by Marc Blau and Sara Kalin in the Los Angeles regional office, found Polizzotto attended an investor conference on September 13, 2011 where the then-CEO expressed confidence the company would receive three loan guarantees worth $4.5 billion for which the company had received conditional commitments from the Energy Department.
Two days later Polizzotto and other executives learned at least one of the guarantees would not be arriving and the VP discussed the matter with a First Solar lawyer who emphasized the fair disclosure requirements relating to the issue.
Congressional enquiry cast doubts
On September 20, a Congressional enquiry to the Energy Department about the status of the conditional loan guarantees caused jitters among investors and the SEC says the following day Polizzotto drafted ‘talking points’ which emphasized the high probability of First Solar receiving two of the loan guarantees and the low probability of receiving the third. He then instructed at least one institutional investor and one analyst by telephone that if they wanted to be conservative, they should assume one of the loan guarantees would not be arriving.
The SEC has taken no enforcement action because of First Solar’s previous good record on fair disclosure and because the company, upon learning of the breach of disclosure rules, issued a press release about the loan guarantee before the market opened the following day and then self-reported the breach to the SEC.
The company then took further remedial measures including extra fair disclosure training for staff.
In addition to settling the charge, Polizzotto agreed not to breach fair disclosure rules in future.