Regulation Fair Disclosure

Regulation Fair Disclosure, commonly abbreviated as Reg FD, was adopted by the SEC in August 2000 and fundamentally changed the relationship between public companies and Wall Street analysts. Before Reg FD, it was common practice for corporate executives to hold private briefings with select sell-side analysts and institutional investors, sharing earnings guidance or other material information before it reached ordinary investors. This created a two-tiered information environment that put retail investors at a systematic disadvantage.

Under Reg FD, if a company intentionally discloses material non-public information to any covered person — which includes broker-dealers, investment advisers, investment companies, and holders of the company's securities who might trade on the information — it must simultaneously make that same disclosure publicly. If the selective disclosure was unintentional, the company must make public disclosure promptly (within 24 hours or before the next trading day, whichever is sooner).

Public disclosure under Reg FD can be accomplished in several ways: filing a Form 8-K with the SEC, issuing a press release, or holding broadly accessible public calls or webcasts. Today, most companies webcast their quarterly earnings calls live and post transcripts and slide decks on their investor relations websites within hours. Some companies have also begun using social media channels (pre-approved by the SEC under a 2013 guidance following the Netflix case) as a means of broad public dissemination.

Reg FD does not apply to all communications. Disclosures made to parties who have agreed to maintain confidentiality — such as investment banks working on a merger or legal counsel — are exempt. Communications with credit rating agencies made in the ordinary course of business are also excluded. Additionally, Reg FD covers only U.S.-listed companies and their domestic disclosure practices; foreign private issuers are exempt.

The practical impact of Reg FD has been significant. Investor relations practices have been transformed, with companies now conducting large analyst days open to all investors and carefully scripting executive comments to avoid inadvertent selective disclosure. Some critics argue Reg FD has reduced the flow of information to markets by making companies more guarded, while proponents contend it has leveled the playing field and increased the quality of public disclosures by forcing companies to be more deliberate about what they say publicly.