Regulation Fair Disclosure (Reg FD)

Regulation Fair Disclosure (Reg FD) is a rule passed by the Securities and Exchange Commission in an effort to prevent selective disclosure by public companies to market professionals and certain shareholders.

Reg FD states that when a publicly traded company or issuer of stock discloses any material nonpublic information regarding that issuer or its securities to a limited group of individuals, the issuer must make public disclosure of that information. Such disclosures must be made simultaneously if it is an intentional release of information. Non-intentional sharing of such information must be promptly followed with public disclosures.

Many companies in the past released important information in meetings and conference calls where shareholders and the general public were excluded. The goal of Reg FD is to level the playing field between individual investors and institutional investors.

Reg FD was created in response to instances when issuers of stock gave advance warnings of earnings results and other nonpublic information to selected institutional investors and analysts. This created circumstances that allowed those with the information to make a profit or avoid losses at the expense of the rest of the investing community.

Concerns arose about loss of confidence in the integrity of market because of unfair disclosure practices. The sharing of nonpublic information with select groups could also border on examples of insider trading.

Reg FD is limited in how it may be applied. The rule does not cover all communications made with individuals outside the issuer. The regulation applies specifically to communications and interactions with securities market professionals. It also applies to holders of the issuer's securities in situations where it is likely and reasonably possible that the information will influence their trading activity.

The individuals who fall under the authority of Reg FD include senior officials with an issuer and others who engage in regular communication with securities holders and securities market professionals. This allows companies to continue to make disclosures to the media or issue standard business communications such as press releases.

Publicly traded companies may conduct earnings and forecast calls to inform analysts who follow their stock about recent developments and plans. Those conference calls are matched with simultaneously issued press releases of the statements made by the company during those calls. Recordings of the calls are also made available after the sessions end to give anyone in the public the chance to hear the comments that were made. The company may also file Form 8-K with the SEC to provide public disclosure of the information that was shared.