A federal judge in New York threw out the Securities and Exchange Commission's lawsuit against Siebel Systems Inc., dealing a setback to regulators' drive to ensure that companies share key information with all of their investors, not just favored clients and analysts.

In the lawsuit filed last year, the SEC accused the software company, Chief Financial Officer Kenneth A. Goldman and Vice President Mark D. Hanson of violating fair-disclosure rules that bar senior executives from sharing material nonpublic information with selected clients likely to use it to buy and sell stock.

Siebel argued that the information its officials provided in two meetings on April 30, 2003, was neither private nor important enough to trigger the SEC rule. Goldman allegedly told investors that the San Mateo, Calif., company's sales were "good" and its deal pipeline was "growing." Those statements contrasted with more downbeat comments from Siebel's top executive in conference calls and speeches earlier that month, regulators argued.

U.S. District Judge George B. Daniels disagreed, reasoning that the SEC had unfairly nitpicked the executives' words. The judge did not address broader arguments by Siebel that sought to limit the agency's authority.

"Excessively scrutinizing vague general comments has a potential chilling effect which can discourage, rather than encourage, public disclosure of material information," Daniels wrote in an opinion issued late Wednesday.

The agency's approach "places an unreasonable burden on a company's management and spokespersons to become linguistic experts," Daniels wrote.

Since the rule was adopted in 2000, the SEC has sued corporate executives for running afoul of their disclosure obligations only seven times. Defendants in each of the previous cases settled the charges without admitting or denying wrongdoing.

In March, Flowserve Corp. agreed to pay $350,000 to settle disclosure allegations. Drugmaker Schering-Plough Corp. paid $1 million to settle related charges in September 2003. Siebel itself settled previous disclosure claims by paying $250,000 in 2002.

The more recent Siebel case attracted potent legal firepower on both sides. The U.S. Chamber of Commerce filed a friend-of-the-court brief for Siebel, highlighting corporate-free-speech rights. Nearly two dozen prominent securities law professors, including the University of Rochester's Joel Seligman, Georgetown University's Donald E. Langevoort, and Columbia University's John C. Coffee Jr., supported the SEC's efforts to crack down on favoritism and improper trading.

"We contested the SEC's claims in order to exonerate the company and its executives and to bring clarity to an important issue that was mishandled by the regulators," Kathleen M. Sullivan, an outside lawyer for Siebel, said in a prepared statement. "This was a win not only for Siebel but for all public companies trying to do the right thing."

The SEC is reviewing the decision and has not yet determined whether it will appeal.