Company vulnerable over former CFO’s irresponsible tweets
Francesca’s Collections, a retailer of women’s apparel, may currently be in hot water with the Securities and Exchange Commission (SEC) over messages sent out on Twitter by the company’s former CFO, Gene Morphis.
On March 7, six days before the company filed its annual report with the SEC, Morphis tweeted “Board Meeting. Good numbers=Happy Board.” This appears to be a violation of SEC regulations, as the tweet contained material, nonpublic information that was divulged only to a select audience – Morphis’ Twitter followers.
Morphis’ name did not appear on the account profile, but it was linked to his Facebook and LinkedIn accounts as well as his personal blog. The account has since been deactivated.
After a two-day investigation, Morphis was fired on May 13. In a press release announcing the termination, the company simply stated that he had “improperly communicated company information through social media.”
Francesca’s Collections claims it had been unaware of Morphis’ activities prior to May 11, but the company may still face SEC enforcement action. David Cifrino, a securities attorney, told CFO Magazine that violations of that type typically result in monetary settlements ranging from $50,000 to $500,000 and, more importantly, can do significant reputational damage to the company.
“To the extent the company can show it had policies prohibiting that sort of behavior, the SEC might take that into consideration,” says Cifrino. “But ultimately, a company is responsible for the behavior of its officials, and anyone it entrusts as CFO ought to know that tweeting material nonpublic information would be a problem.”
The incident clearly highlights the risks of hiring unreliable individuals for high-level executive and financial positions. CFO jobs especially demand individuals with discretion and a forward-thinking disposition.
Working with professional recruiters can help companies ensure that they are reaching top-quality candidates in every financial professional search. Relying on the judgement of experts allows companies to avoid future scandals by hiring the right applicant for each open position.