The Securities and Exchange Commission (SEC) got a little

bit of a disciplining from the U.S. District Court for the Southern District of New York on its somewhat ferocious enforcement of Regulation FD, just as the fair disclosure rule approached its fifth birthday. In the first lawsuit to spring from Reg FD, the court dismissed the SEC's charges that Siebel Systems Inc. had released nonpublic information in private meetings. While the decision was viewed as a blow to the SEC, lawyers say it's not likely to have much impact in the corporate community or on the way companies comply with Reg FD. In the years since its passage, executives have become accustomed to watching what they say, especially in private meetings, and this ruling–especially since it's not from an appellate court–doesn't signal that they can relax their vigilance. What the decision does suggest is that SEC enforcement may have to rein itself in, observers say.

Reg FD, which went into effect in October 2000, aimed to stop executives from providing investment analysts with material information that they hadn't disclosed to the public. In the Siebel case, the SEC charged that in April 2003, CFO Kenneth Goldman disclosed material nonpublic information at two private meetings, which were also attended by Mark Hanson, the company's head of investor relations and senior vice president. It was the second time that the SEC had accused Siebel of violating Reg FD; the first time, in 2002, the company paid a $250,000 civil penalty and agreed to a cease-and-desist order. This time, Judge George Daniels ruled that the SEC's charges were unjustified.