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Did Apple Cross Legal Lines By Revealing Its Continued Growth In China?

After Monday’s stock market decline, CEO Tim Cook personally assured an investor that Apple was doing just fine.

Did Apple Cross Legal Lines By Revealing Its Continued Growth In China?
[Photo: Justin Sullivan/Getty Images]

With the stock market in free fall Monday morning as a result of financial turmoil in China, investors may have been worried about their stakes in leading tech companies like Apple. To assuage such concerns, CEO Tim Cook wrote a note to CNBC analyst Jim Cramer, informing him that the company was still seeing “strong growth” in China through July and August.

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In his email, Cook said iPhone activations had increased sharply of late, and that the App Store had shown “the best performance of the year” in China over the past two weeks. A recent report by research firm Gartner supports Cook’s convictions, indicating that iPhone sales grew 68% across China in the second quarter this year.

The upswing in Apple’s stock prices later in the morning indicates that investors heard Cook’s words loud and clear. But his letter may be standing on questionable legal grounds: Lawyers told MarketWatch that it may be in violation of a rule put forth by the Securities and Exchange Commission (SEC). The Fair Disclosure regulation dictates how public companies reveal internal information to investors–that is, all investors should be privy to the same information at the same time.

“The SEC will undoubtedly want to take a look at this,” Dorsey & Whitney partner Thomas Gorman told MarketWatch.

Usually, the media is exempt from this rule, and is legally granted access to information that is not yet public. This particular case, however, is a bit of a gray area because Cramer also happens to be at the helm of a charitable trust portfolio, through which he owns Apple stock.

It’s also unclear when Cramer received the email, and how long he took to release it publicly via CNBC; Cook could have easily sent out a general notice to investors rather than reaching out to Cramer personally.

Companies are allowed to disclose this type of information through social media, following an SEC ruling in 2013.

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[via CNBC]

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About the author

Pavithra Mohan is an assistant editor for Fast Company Digital. Her writing has previously been featured in Gizmodo and Popular Science magazine.

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