The US Securities and Exchange Commission is to determine whether Mark Hurd, the former Hewlett-Packard chief executive, told then-contract employee Jodie Fisher that the company planned to buy Electronic Data Systems and if any laws or rules were
violated as a result.
The information would have been worth a great deal to an investor who acted on it, setting the stage for a classic insider trading investigation.
People familiar with the inquiry, which was confirmed by HP late on Monday, said on Tuesday that the agency was looking into whether anyone traded as a result of Mr Hurd’s alleged words.
Ms Fisher has denied any such trading and told others that she only passed the information on to her mother, who likewise did not trade, according to
people familiar with her account.
The claim that Mr Hurd told her in advance of the 2008 acquisition was contained in an eight-page letter to Mr Hurd that eventually led to his forced resignation from the company he ran for five years.
Even if no one profited by trading ahead of HP’s bid for EDS, the SEC could still try to find out whether Mr Hurd ran afoul of fair disclosure regulations the agency adopted in 2000, according to John Coffee, a Columbia Law School professor.
“The SEC would respond almost like Pavlov’s dog to any allegation that a CEO leaked the word of an acquisition target,” Mr Coffee said. “The SEC doesn’t want CEOs leaking names.”
Regulation FD bars selective disclosure of material information to financial analysts, brokers and shareholders who are likely to trade, requiring that such data be distributed to all interested parties at once.
It is understood that Ms Fisher did not own any stock, however, so the SEC probe could end quietly. Ms Fisher’s attorney, HP and Mr Hurd all declined to comment.
Even if she did own shares, Mr Hurd might have valid defences, Mr Coffee said. Under some circumstances, executives can share advance information if confidentiality is pledged, according to the agency’s website.
If the SEC does find grounds to believe a violation occurred, it might seek a consent decree from Mr Hurd in which he pledges not to violate securities law in future, Mr Coffee said.
Since leaving HP, Mr Hurd has joined Oracle as a co-president, while HP tapped a former Oracle foe to succeed him.
Mr Hurd has hired a defence lawyer, Daniel Bookin, who did not return a call seeking comment.
“Mark acted properly in all respects,” said Glenn Bunting, a spokesman for Mr Hurd. “It is understandable that the SEC is looking into the events surrounding Mark’s departure, which was followed by a precipitous drop in the value of HP’s stock.”