NEW YORK (CNN/Money) -
Federal regulators may sue Schering-Plough Corp. and its CEO over allegations that the drugmaker revealed information to institutional investors before the general public, Schering-Plough said Wednesday.
Schering-Plough said the Securities and Exchange Commission sent notice of its preliminary decision to recommend civil action against the company, and CEO Richard Jay Kogan, over possible violations of Regulation Fair Disclosure.
Shering-Plough shares fell again Wednesday for their lowest close in more than six years.
The regulation prohibits companies from making selective disclosures of material non-public information, either inadvertently or otherwise.
Investigators have been looking into a mysterious October tumble in Schering-Plough stock that came when the company met privately with institutional investors in Massachusetts. Days later, the company cut profit guidance, bringing accusations that individual investors were left in the dark.
Shares of Schering-Plough (SGP: down $0.13 to $15.75, Research, Estimates) fell 13 cents to $15.75, their close levels since October, 1996.
A civil lawsuit would be only the latest problem for Schering-Plough, which has suffered slumping sales following the loss of patent protection last year on allergy drug Claritin.
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An SEC spokeswoman declined to comment on the possible lawsuit. Schering-Plough, based in Kenilworth, N.J., has not explained the matter. But the company may have a chance to do so by filing the customary legal brief in response to the SEC notice.
In its 10-K filing Wednesday, Schering-Plough said there have been several private lawsuits on the issue, which it described as "alleged disclosures made during meetings with investors."
Regulation Fair Disclosure took effect more than two years ago. The rule was intended to level the playing field for small investors, giving them access to potentially market-moving information that only analysts and other big Wall Street players once had.
At least one company, Raytheon, has settled with regulators over the issue. The SEC could not immediately say which other companies have settled Reg FD matters.
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