Analysts say Apple violated SEC disclosure rules

Apple is coming under serious scrutiny from industry analysts, business leaders and now possibly the United States Securities and Exchanges Commission (SEC) for their failure to disclose the whole truth about the health problems Steve Jobs has had in the last 7 months. While Apple has said that Jobs' health is a private matter, as the CEO of a publicly traded company, many view the honest disclosure of his health issues to be of paramount importance.

"It's a material fact," Berkshire Hathaway head Warren Buffett told CNBC on Wednesday. "Whether he is facing serious surgery or not is a material fact. Whether I'm facing serious surgery is a material fact."

As a "material fact" Buffet explained that Apple was legally required by the SEC to report it to shareholders and that failure to do so was in violation of the law.

"If I have any serious illness, or something coming up of an important nature, an operation or anything like that, I think the thing to do is just tell the American, [or in my case] the Berkshire shareholders about it," Buffett said.

In addition, Paul Argentini, a professor at the Tuck School of Business at Dartmouth told Cult of Mac that "The law is very clear — full disclosure of material information," and that "If a CEO's liver transplant isn't material, what is? But whether the SEC has the balls to do something about it, we'll see."

While there is nothing in the SEC requirements that directly says firms are required to disclose medical details about executives, they are required to divulge 'material' information investors should know before buying or selling stock. In August of 2000, the SEC adopted Regulation FD, to address the disclosure of information by publicly traded companies and other issuers. Regulation FD says that when an company has nonpublic information that is known to people who could act on it (buy/sell stocks, etc) the company must make public disclosure of that information, to prevent insider trading and to protect investors from fraud. If Jobs' had died, or been close to death, and those at Apple sold stock before the stock dropped as a result, they would have had an unfair advantage over other stockholders.

Thankfully, Jobs is expected to make a full recovery, but the issue now is what Apple and Jobs knew, and what the public knew.

"If they tried to lessen the disclosure and make it misleading by omission, that's just as bad as telling something that flat isn't true," said securities lawyer Jeffrey C. Soza, in an interview with the Los Angeles Times.

In January, Jobs said that he was suffering from a nutritional problem, but it was learned over the weekend that he had in fact had a liver transplant at Methodist University Hospital in Memphis, Tennessee. In a statement posted on its Web site, the hospital said "Mr. Jobs had received the organ because he had the most urgent need for a new liver when one became available." Approximately 6,500 Americans receive a liver transplant each year, and the first one was done in 1967. There are currently 17,000 people in the US on the waiting list for a donation.

This is not the first time Jobs has been under the knife in a serious way. In 2004, Jobs had surgery for pancreatic cancer, that led to massive weight loss and a leave of absence from the company. However, all of that information was made public at the time.

This is also not the first time that Apple has been in the crosshairs of the SEC over stock issues. In 2007, Apple faced an SEC investigation over issues related to backdating stocks. As a result, their former CFO Fred Anderson paid nearly $3.5 million in fines and penalties.












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36 Comments

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I hate Apple and would love to see them fail, but if share holders think they have some kind of right to know about the personal health of any employee, they need a reality check. Steve is a person just like anyone else. If you are an Apple share holder and demand anything other than for him to come back healthy, I hope you burn in hell.

The Oracle of Omaha strikes again. I stopped reading after his quote because like usual, he lays it down as concisely as possible. I love to hear his views on the market.

Oh and on topic, Apple is in trouble. :P

Apple or jobs are kind of screwed on this one. Either they admit they were lying about the severity of his health, or if the severity of his health wasn't critical he has to explain why he was able to get a liver others in more dire conditions needed.

excalpius, you really need to read up on medical privacy laws in the US (by some of your comments, I assume you don't live here). It is absolutely illegal for a hospital or company (private or public) to disclose medical information on anyone without that person's permission. Should Steve Jobs have made the information public to investors? Possibly. But the fact remains that he has an absolute right NOT TO.

http://www.bloomberg.com/apps/news?pid=206...id=aRYCnEpXRww0

In this day in today's world, human beings are becoming more crazy and more insane then ever. Scientific statistics can actually prove this if anyone does a little research. Investors and most of you people are just insane.

Steve Jobs is successful. At same time, he is sick from cancer and most likely is scared to death that he might die or that his cancer might get worse or that it will not be curable or that.........109348590 things might go in his mind since HE has cancer and MIGHT die. Why should he tell the WHOLE world (when you tell investors then you are actually telling everyone) about his personal life and the steps he is taking to try to cure his cancer. I understand that people invested in Apple, but stop and think, THEY INVESTED in Apple Company and NOT on Steve Jobs head. He does have impact on the stock prices, but for gods sake, fu** money and technology when it comes to his health and the complicated issues and important decisions that he has to think of and take in order to survive.

The man clearly said he will take a medical leave for 6 months. He said his situation is worse than he thought at first. Now, should he get on twitter and twitter about all his medication that he is taking, the places he goes, the doctors he sees, the headaches he gets, etc... You guys are really crazy!

Like I said humanity is going crazy and straight insane. You think all those investors sent him letters wishing him a fast recovery and trying to be human to actually care about his health. Most likely no. They just want MONEY. THEY WANT THEIR STOCKS TO INCREASE. THEY DONT GIVE A FU** ABOUT YOUR HEALTH or ANYONE ELSE'S, AS LONG AS THEY GET MORE MONEY.

Pathetic for them.
Pathetic for you all for protecting them.
Pathetic for the American society.

-Eagle101

Eagle101 said,
They just want MONEY. THEY WANT THEIR STOCKS TO INCREASE. THEY DONT GIVE A FU** ABOUT YOUR HEALTH or ANYONE ELSE'S, AS LONG AS THEY GET MORE MONEY.

Pathetic for them.
Pathetic for you all for protecting them.
Pathetic for the American society.

-Eagle101

Um thats not just America. Thats everyone. Noone gives a **** about you. The only thing important in this world is money because with money comes everything else (power, respect, etc)

So you're saying the privacy of one person, who isn't even allowed to have this privacy, is more important than the economic conditions/position of hundreds or thousands of people?

Trong said,
So you're saying the privacy of one person, who isn't even allowed to have this privacy, is more important than the economic conditions/position of hundreds or thousands of people?

Exactly. Read my post one more time. It clearly says that those people invested in Apple Comany and NOT on Steve Jobs head. I understand that he plays a major role on the company and stock price, but when his life is in danger and he fighting with cancer, then people should be soft and make him feel better and let him and his family make the best decisions about his life instead of telling the whole world what surgery he has and what he will do next.

But again, what I said came true again with you. The first thing that went in your mind was not his health or his survival, but the money aspect that others will receive.

Pathetic!

plural said,

Um thats not just America. Thats everyone. Noone gives a **** about you. The only thing important in this world is money because with money comes everything else (power, respect, etc)

You are right. It is everyone. But it happens a lot more in the United States than any other part of the world. People lost their dignity and morals.

Not sure what you're smoking bud, but people need to eat and food isn't exactly free. As much as I would hate to make decisions like this, I think many of us can agree that the life of one person vs. the life of many isn't exactly rocket science.

Fortunately, no one had to make that decision. Hell, all anyone asked for was the truth. But in this day in age, where people have no dignity or morals, caring about the lives of others simply didn't matter.

dead.cell said,
Not sure what you're smoking bud, but people need to eat and food isn't exactly free. As much as I would hate to make decisions like this, I think many of us can agree that the life of one person vs. the life of many isn't exactly rocket science.

Fortunately, no one had to make that decision. Hell, all anyone asked for was the truth. But in this day in age, where people have no dignity or morals, caring about the lives of others simply didn't matter.

I would suggest that if how Apple's stocks fare comes down to whether you eat or not that you should not be in the business of investment. I would suggest something like a fast food restaurant attendant.

At $139.86 a pop AAPL isn't exactly for the poverty-stricken family man.

The point was that Jobs wanted to avoid the INEVITABLE "Apple falls on news Jobs needs a liver transplant" and then the slooooooooooooooooooooooooooow return of the stock IF we then hear, months later, "Job recovering from cancer, slowly returning to work".

Apple would have losts 10's of billions of market cap for however long this went on.

Unfortunately, THAT is the natural order of things and how the system is supposed to work.

By lying about this, laying low, and then only disclosing it AFTER the HUGE risk was over, he disenfranchised owners and investors in Apple of their right to practice prudent RISK ASSESSMENT as to their level of comfort retaining Apple stock, etc.

This is the very definition of STOCK MANIPULATION in a very real and criminal way...keeping the stock artificially high by failing to disclose material information of direct bearing on the health of the company.

With a username of Windows7even, I won't question whether you're slightly biased to a particular way of thinking... but I think most people here are agreeing that, if the health of the CEO was likely to have serious impact on the stocks, it should have been fully disclosed.

I don't think even the most closed minded Apple enthusiasts would defend it.

If I were an investor in Apple I would be more worried about being invested in a person instead of the company. If a company can't survive/succeed without one person then that company has some bigger issues.

SOOPRcow said,
If I were an investor in Apple I would be more worried about being invested in a person instead of the company. If a company can't survive/succeed without one person then that company has some bigger issues.


I dumped AAPL stocks when this whole mess with his health started, as whenever someone says something bad about his health, it plunges down.

im just wondering when someone will suggest that all Corporate Officers wear health monitoring systems 24hrs a day and the information be sent out to the public over the internet.

LOL i just realized the new peripherals for the iphone could make this a possibility TODAY, isnt that ironic

I disagree. Very personal matters like these have no place in the business world. While he's the figurehead of Apple, he's still an employee and, crucially, a human being, and has the same right to privacy as the rest of us. Just because someone has become successful in their life, doesn't mean they aren't entitled to keep personal things to themselves.

So, if you had an employee and you depended on him/her for the completion of a huge project that means a great deal to the future of the company and he goes on leave 'to rest' and you find out he/she was having a triple bypass, would you think it is right not to be told? your company depends on the person, you, as the employer have a right to know that the person you are putting your trust and financial well-being is able to do so to completion, others depend on him/her, their jobs depends on it?

no matter how personal it is, its breaking the law & how publicly traded businesses are supposed to work. its unfortunate for the person, but when your company owners are a bunch of shareholders, you are required to disclose any problems with executive management. investors buy and sell stock based on reports, news, and predictions from companies.

you are looking at it from a personal perspective, and from that perspective you are correct. but from the eyes of the business world, how apple handled it is not right.

what said,
I disagree. Very personal matters like these have no place in the business world. While he's the figurehead of Apple, he's still an employee and, crucially, a human being, and has the same right to privacy as the rest of us. Just because someone has become successful in their life, doesn't mean they aren't entitled to keep personal things to themselves.


You never invested, haven't you?

He is the head and face of Apple. That was made patently clear when he left and the company ran straight into the ground.

Seeing how important Jobs is to Apple, they really should have been upfront with their investors. Steve has done a wonderful job in demonstrating what happens when he is not in control of the company, w/o him it would either be gone or no where near the company it is today. His health is (unfortunately) tied to the companies success right now.

Hopefully they can break that, for the sake of both parties. Steve Jobs and the company. Glad to hear he's doing better!

Agreed, while health may be a private matter everyone who has a share of Apple stock has a vested interest in Jobs life. He runs the company and has ultimate control over the stock value which is why companies have to discolse significant events at the office that may affect the share price, jobs getting a new liver is one of them.


They didnt need to say that he was having a liver transplant but the fact that they lied that it was "nutritional problem" is what I have issue with. They should have said that he has a serious, but curable, medical condition and wont return until June at the earliest...none of this hes fine crap when he clearly was not

Agreed. If the health of the CEO has direct effects on the shares, the full health situation with Steve Jobs should have been disclosed. Unless they can prove with medical reports that they simply did not know at the point they said he simply had a nutritional problem, they deserve to get nailed unfortunately!

If it was an issue regarding who he was dating or not, whether he was gay or not, whether he's a racist or not, whether he was taking a long weekend in Argentina or not...those are NOT material issues and quite frankly nobody's business but his own.

But when he was one step away from the grave (as ANY major surgery risks) that was material by definition.

Oh, and the phrase "expected to make a full recovery" is bull****. If he is recovering successful from surgery, he's still on anti-rejection drugs for the rest of his life, which STILL may only be 5-10 years, based on statistics.

All if this is VERY material to the future of Apple. And while I respect Steve's right to privacy and understand his almost paranoid desire for secrecy, this is something his lawyers should have brought before the board and dealt with MONTHS ago...not now.

What a mess this is going to be...

+1

I also have to wonder.. what put him at the top of the list over the 17,000 other people in the US waiting for a liver? I only ask because I've been waiting 15+ yrs for similar medical help, and its not the first time favoritism has been shown towards the famous and persons with wealth.