"It's a material fact," Berkshire Hathaway head Warren Buffett told CNBC on Wednesday. "Whether he is facing serious surgery or not is a material fact. Whether I'm facing serious surgery is a material fact."
As a "material fact" Buffet explained that Apple was legally required by the SEC to report it to shareholders and that failure to do so was in violation of the law.
"If I have any serious illness, or something coming up of an important nature, an operation or anything like that, I think the thing to do is just tell the American, [or in my case] the Berkshire shareholders about it," Buffett said.
In addition, Paul Argentini, a professor at the Tuck School of Business at Dartmouth told Cult of Mac that "The law is very clear — full disclosure of material information," and that "If a CEO's liver transplant isn't material, what is? But whether the SEC has the balls to do something about it, we'll see."
While there is nothing in the SEC requirements that directly says firms are required to disclose medical details about executives, they are required to divulge 'material' information investors should know before buying or selling stock. In August of 2000, the SEC adopted Regulation FD, to address the disclosure of information by publicly traded companies and other issuers. Regulation FD says that when an company has nonpublic information that is known to people who could act on it (buy/sell stocks, etc) the company must make public disclosure of that information, to prevent insider trading and to protect investors from fraud. If Jobs' had died, or been close to death, and those at Apple sold stock before the stock dropped as a result, they would have had an unfair advantage over other stockholders.
Thankfully, Jobs is expected to make a full recovery, but the issue now is what Apple and Jobs knew, and what the public knew.
"If they tried to lessen the disclosure and make it misleading by omission, that's just as bad as telling something that flat isn't true," said securities lawyer Jeffrey C. Soza, in an interview with the Los Angeles Times.
In January, Jobs said that he was suffering from a nutritional problem, but it was learned over the weekend that he had in fact had a liver transplant at Methodist University Hospital in Memphis, Tennessee. In a statement posted on its Web site, the hospital said "Mr. Jobs had received the organ because he had the most urgent need for a new liver when one became available." Approximately 6,500 Americans receive a liver transplant each year, and the first one was done in 1967. There are currently 17,000 people in the US on the waiting list for a donation.
This is not the first time Jobs has been under the knife in a serious way. In 2004, Jobs had surgery for pancreatic cancer, that led to massive weight loss and a leave of absence from the company. However, all of that information was made public at the time.
This is also not the first time that Apple has been in the crosshairs of the SEC over stock issues. In 2007, Apple faced an SEC investigation over issues related to backdating stocks. As a result, their former CFO Fred Anderson paid nearly $3.5 million in fines and penalties.