Securities Law – Additional Offerings, Disclosure & the Securities Exchange Act of 1934 – Issuer Reports & Recordkeeping

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.

Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.

Home Mortgage Disclosure Act

In 1975, Congress enacted the Home Mortgage Disclosure Act (HMDA). The statute can be found at 12 U.S.C.S. §2801. In its findings and declaration of purpose, Congress stated the following:

The Congress finds that some depository institutions have sometimes contributed to the decline of certain geographic areas by their failure pursuant to their chartering responsibilities to provide adequate home financing to qualified applicants on reasonable terms and conditions.


The purpose of this [law] is to provide the citizens and public officials of the United States with sufficient information to enable them to determine whether depository institutions are filling their obligations to serve the housing needs of the communities and neighborhoods in which they are located and to assist public officials in their determination of the distribution of public sector investments in a manner designed to improve the private investment environment.

HMDA is implemented by Regulation C, an administrative regulation promulgated by the Federal Reserve Board. Briefly stated, HMDA and Regulation C were designed so that information could be gathered on whether certain financial institutions serve the housing credit needs of the neighborhoods in which they are located.

Institutions Covered

The provisions of HMDA apply to depository and non-depository lenders which meet certain criteria set forth in the law.

What must covered institutions report?

  • data on loan applications, originations, and purchases
  • the race, sex, and income of mortgage applicants and borrowers
  • the class of purchaser for mortgage loans, and
  • the reasons for their decision not to grant credit

The information reported by covered institutions is available for review by the public.

Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.