Regulation FD
The rule applies to all directors but only to certain officers and employees of an institution. Executive officers of the institution, as well as investor relations and public relations personnel, are covered in all instances, as are other officers, employees and agents who communicate regularly with the types of persons to whom Regulation FD applies. An institution can adopt a policy that can help determine the other persons to whom Regulation FD applies by providing that only certain individuals are authorized to speak on behalf of the company with respect to financial disclosure matters.
Material, nonpublic information is not defined in the rule and intentionally so. The term “material” has the same definition as in other securities law contexts. It covers information that would be important to the investment decision of a reasonable investor and significantly alters the “total mix” of information available with respect to the particular security.
The rule covers disclosures only to certain types of persons, including broker-dealers, securities analysts and other securities professionals, as well as shareholders in circumstances when it is reasonably foreseeable that they will trade in the company’s securities. The rule specifically exempts communications to employees, although broad communications to an institution’s employee base may precipitate rumors or leaks that create other problems under the securities laws. Regulation FD also exempts advisors to the company such as lawyers, accountants and bankers who owe the company a duty of trust, as well as rating agencies and persons bound by confidentiality agreements. It also excludes by omission persons such as the general media, vendors, customers and business partners.
In certain circumstances, Regulation FD requires that information be publicly released. So far as the rule is concerned, a filing with the SEC on Form 8-K always qualifies as “publicly released.” Short of that, the rule says only that other forms of “broad non-exclusionary distribution to the public” will qualify. Discussion in a conference call covering quarterly earnings qualify, if the call has been properly announced and is open to the public, as a result of the provisions of Item 2.02 of Form 8-K.
The rule requires simultaneous disclosure of matters that are selectively disclosed on an intentional basis. “Simultaneous” appears to mean just that, making it essentially impossible to accomplish. An intentional violation of Regulation FD is, for all practical purposes, not curable—although that does not mean that steps should not be taken to limit the damage.
An intentional selective disclosure means that the person making the disclosure knows that the information is both material and undisclosed or is reckless in not knowing that.
Information that is disclosed selectively on a nonintentional basis must be publicly disclosed promptly. “Promptly” means as soon as practicable but in no event after the later of 24 hours following the disclosure or the next market opening.
AI
