Regulatory Reporting and Disclosures

This section covers the broader regulatory framework for disclosures and reporting: Regulation FD (Fair Disclosure) for issuers, Municipal Securities Rulemaking Board (MSRB) rules for municipal dealers, and Cboe rules for options reporting.

Regulation FD (Fair Disclosure)

Regulation FD applies to issuers (not broker-dealers directly), but it is tested because broker-dealers must understand the rules about selective disclosure of material information.

Core principle: When an issuer discloses material nonpublic information to certain recipients (analysts, institutional investors), it must simultaneously make the information public.

Intentional vs. Unintentional Disclosure

• A disclosure is intentional when the person making it knows (or is reckless in not knowing) that the information is both material and nonpublic

Think of it this way: If a CEO deliberately tells an analyst about upcoming earnings before the public announcement, that is intentional selective disclosure. The company must release the same information to the public at the same time. If the CEO accidentally lets something slip at a dinner party, the company has until the next trading session (or 24 hours, whichever is later) to make it public.

Exceptions to Regulation FD

Disclosures to persons who owe a duty of trust or confidentiality are exempt:

• Attorneys
• Accountants
• Rating agencies (under confidentiality agreements)
• Temporary insiders acting in a professional capacity

Exam Tip: Gotchas

• Intentional = simultaneous; unintentional = promptly. The timing distinction between these two is frequently tested.
• Reg FD applies to issuers, not broker-dealers. A broker-dealer receiving selective disclosure is not the one violating Reg FD; the issuer is.

MSRB Disclosure and Practice Rules

For municipal securities transactions, the MSRB has its own set of disclosure rules:

• MSRB Rule G-15: Governs confirmations, clearance, settlement, and uniform practice requirements for customer transactions in municipal securities
  • Confirmations must include: security description, CUSIP (Committee on Uniform Securities Identification Procedures) number, trade date, settlement date, yield/price, accrued interest, capacity (agent/principal), and total dollar amount
• MSRB Rule G-26: Governs customer account transfers for municipal securities (parallel to FINRA Rule 11870 for general securities)

Think of it this way: MSRB rules mirror FINRA rules but apply specifically to municipal securities. G-15 is the muni version of SEC Rule 10b-10 (confirmations), and G-26 is the muni version of FINRA Rule 11870 (account transfers via ACATS).

Exam Tip: Gotchas

• MSRB Rule G-15 covers customer transactions only. Inter-dealer municipal transactions have separate rules.
• G-26 parallels FINRA 11870. Both govern account transfers, but G-26 applies specifically to municipal securities positions.

Cboe Reporting Rules

The Cboe (Chicago Board Options Exchange) has its own reporting requirements that supplement FINRA rules:

Exam Tip: Gotchas

• Cboe rules supplement, not replace, FINRA rules. Options firms must comply with both Cboe and FINRA reporting requirements.
• Cboe 7.2 specifically covers uncovered short positions. This reporting requirement reflects the higher risk of uncovered (naked) options writing.