Media Embargo Secrets Exposed: How and Why Companies Share Stock-Moving News

Seven hours later, the premature USA Today story was confirmed true after the FDA announced officially the approval of Vivus' Qsymia. Yet I knew FDA had approved Qsymia the moment I read the USA Today story -- and said as much on Twitter -- because of my experience dealing with embargoed access to material information.

The USA Today reporter could only have written her story with the cooperation of Vivus and its public relations firm Golin Harris. Vivus President Peter Tam is quoted extensively speaking about Qsymia, including never-before released details on launch timing and comments on pricing. The story was also topped with a photo showing two Qsymia pill bottles. The photo is credited to "Vivus, Inc.", meaning the company or its representatives provided it to the newspaper.

Vivus had to be incredibly confident that FDA was going to approve Qsymia in order to provide this high level of access to USA Today -- and other media outlets, by the way -- in advance of receiving official word of the drug's approval from U.S. regulators. [I was not among the journalists privy to Vivus' largesse with the Qsymia approval news.]

Vivus' decision was also incredibly reckless and foolish because of the risk that news of the Qsymia approval would leak out early. That's exactly what happened when someone at USA Today hit the "publish" button on its story prematurely. At that point, Vivus was in serious trouble but could say nothing because the official approval notice from FDA had not been sent. Efforts to remove the USA Today story were futile because once something hits the web, it's there forever. Meantime, Vivus shares are careening all over the place but Nasdaq won't halt the stock because Vivus has no legitimate news to report -- yet.

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An epic disaster -- largely the fault of Vivus and its PR firm Golin Harris, which tried to stage-manage a drug approval announcement but failed totally. Importantly, FDA was not at fault here at all. There was no leak of Qsymia's approval from the agency.

The questions you're probably asking now is: Why do companies give reporters advanced access to material, market-moving information under embargo? Isn't this a violation of SEC rules? The practice doesn't seem fair and only raises that risk that someone will leak the information or use it for personal gain.

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