Fair Disclosure Requirements for Public Companies

Regulation FD, adopted by the Securities and Exchange Commission in August 2000, provides that publicly traded companies must not make selective disclosures of material non-public information to securities analysts without making that same information available to the public generally. Whenever an issuer of securities or someone acting on the issuer’s behalf intentionally discloses material information to persons described in the four rules in Regulation FD, the information must be released simultaneously to the public. If material information is released inadvertently, the information must then be disclosed promptly to the public.

• Companies that have issued securities registered with the Securities and Exchange Commission under Section 12 of the Securities Exchange Act of 1934,
• Companies required under Section 15(d) of the Securities Exchange Act to file reports with the Commission, and
• Closed-end investment companies (companies that are similar to mutual funds in investment strategy but have non-redeemable shares traded on exchanges).

Regulation FD does not apply to investment companies that are not closed-end or to foreign companies and governments.

Not all material non-public information about a publicly traded company must be made public if the information is selectively disclosed. Only information disclosed by persons acting for the company such as directors, officers, and employees with public relations or stockholder relationship responsibilities must be publicly disclosed and then only if the material information was disclosed to those who reasonably would be expected to trade on the information, including persons such as securities dealers, investment advisers, and stockholders.

Regulation FD also does not apply to information disclosed to persons such as attorneys, accountants, and investment bankers who owe a fiduciary duty to the company to maintain confidentiality of the information. Similarly, Regulation FD does not apply to information disclosed to persons who agree to keep the information confidential and who are subject to insider trading prohibitions if they make use of the information for their own benefit.

Rapid dissemination to the public is required for unintentional disclosure of material information. Regulation FD requires public disclosure of unintentionally disclosed material information “promptly” or as soon as reasonably practicable, prior to the next trading day of the company’s securities, and not later than 24 hours after an officer of the company learns of the unintentional disclosure.

Public disclosure must be designed to provide wide distribution of the information to the public. Filing of a Form 8-K with the Securities and Exchange Commission to provide the information may be considered adequate public disclosure.

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