Way back in April 2004, I wrote an article entitled "Beware the No-Spin Zone," which discussed the days immediately following the conclusion of an SEC investigation or settlement in which companies must be particularly careful not to "spin" the resolution beyond its actual terms (or risk the wrath of the SEC). 

To recap that article, on Wednesday, March 10, 2004, a company called AGCO Corp., which had been the subject of an informal SEC inquiry into its accounting practices, received great news in a letter from the SEC that stated:

This [the previously announced] inquiry has been terminated, and no enforcement action has been recommended to the Commission. We are providing this information under the guidelines in the final paragraph of Securities Act Release No. 5310.

Later that same day, the Atlanta Journal-Constitution reported that AGCO had publicly announced the end of the SEC's inquiry. The newspaper quoted the company's CEO as stating: "It's a good day…. When you're sure that you haven't done anything wrong--but to the outside world it looks like you're guilty of something--it's a real relief to be vindicated from any accusations."  The CEO reportedly added that although AGCO was not going to make the SEC's letter public, "They confirmed that all procedures are accurate and in accordance with prescribed accounting procedures…. The issue, as far as we're concerned, is closed and we can now devote more time to the management of the business and the company."

It is unclear what communications, if any, occurred between the SEC and AGCO following the Wednesday publication of the article in the Atlanta Journal-Constitution.   By Thursday afternoon, however, AGCO had issued what must have been a painful press release titled, "AGCO Corrects Reports Regarding Letter Received from SEC."  This press release included a very different quote from AGCO's CEO:

The termination of the SEC inquiry does not indicate that our accounting procedures or disclosures are correct or that we have been vindicated. That is not what the SEC letter said, and I want to correct what was reported in the media. All the letter said was that the inquiry was terminated. Neither that letter nor anything else said by the SEC staff in any way suggested that AGCO's accounting or related disclosures are correct.

Painful lessons such as this one have led corporations to respect the "No-Spin Zone" in recent years, and helped them to avoid turning what should be a positive development into a negative one.  Indeed, a "default" corporate statement seems to have evolved in the past couple years in response to notice from the SEC of the termination of an investigation: companies now simply say that they are pleased that "the matter is behind us."

For example, consider these four statements from the last 12 months announcing that the SEC had terminated investigations:

1. Swift Transportation, September 2005: "We are pleased this matter is behind us and, looking forward, we will continue to concentrate on improving our operating results."
2. ClearOne Communications, July 2006: "We are pleased that this matter is now behind us and we can focus our full attention on growing our business...."
3. Zale Corp., September 2006: "We are pleased to put this matter behind us."
4. Sipex Corporation, September 2006: ""Now that this matter is behind us, we can focus our full attention on improving our company and growing our business."

Years later, the lesson still seems to be that if a company really wants to put an SEC investigation "behind it," it must respect the No-Spin Zone.