Several news outlets are reporting that the SEC is investigating Apple, presumably in connection with recent announcements about Steve Jobs’ medical issues. Jobs was diagnosed with pancreatic cancer in 2003, which was publicly disclosed almost a year later when he announced he was cured following surgery. In June 2008, the press raised concerns over Jobs’ illness again, and he said he just had a “common bug.” On January 5, 2009, Apple announced that Jobs merely has a “hormonal imbalance” that is easily treatable, only to announce nine days later that he would take a six-month medical leave of absence. The Apple stock price has gone up with the good announcements and down with the bad.
It seems callous that the SEC would investigate a revered business leader guarding his privacy while fighting cancer, but the issue is the disclosure of material facts. Once the company decides they should make an announcement about material facts or correct rumors in the marketplace, they cannot be misleading.
Does a public company have to disclose big news as soon as it happens? Generally, no. But, the duty to disclose could arise for a variety of reasons, including if (i) a periodic filing must be made such as an 8-K, (ii) information has leaked out that is attributable to the Company, (iii) a previous statement is now inaccurate, or (iv) disclosure is required by a securities exchange listing requirement.
Once the duty to disclose arises, securities laws give no weight to the privacy rights of an executive. Maybe they should, but such an approach would be counter to the current framework. The problem for a company like Apple, whose stock price is directly linked to the leadership of their CEO, is that they want to assure the market that Jobs is fine. After they do that, they potentially cause a situation where they must tell the market when he is not fine.
