Quick Answer
Regulation FD prohibits a reporting issuer from selectively disclosing material nonpublic information (MNPI) to securities market professionals (analysts, broker-dealers, investment advisers) or holders likely to trade, without simultaneously or promptly disclosing it to the public. Intentional selective disclosure requires simultaneous public disclosure; non-intentional selective disclosure requires prompt public disclosure (within 24 hours or before the next NYSE opening, whichever is later). Public disclosure is made by filing or furnishing a Form 8-K or by another method reasonably designed to effect broad non-exclusionary distribution.
Regulation FD is the rulebook for the reporting issuer's ordinary-course investor-relations communications. It operates outside the registered-offering framework, governing how issuers talk to analysts and large holders between offerings.
Scope of Regulation FD
The regulation applies to disclosures outside the registration process.
- Reaches a reporting issuer (a company subject to the periodic reporting requirements) or persons acting on its behalf
- Prohibits the selective disclosure of material nonpublic information (MNPI) to:
- Securities market professionals (analysts, broker-dealers, investment advisers)
- Holders of the issuer's securities who are reasonably likely to trade on the information
- Triggered without simultaneous or prompt public disclosure of the same information
Reg FD does not cover communications inside a registered offering. The offering communications framework (the permitted waiting-period and pre-filing communications, the FWP rules) governs there. Reg FD covers the ordinary investor-relations life of a reporting company.
Exam Tip: Gotchas
- Reg FD applies OUTSIDE the registration process. Inside a registered offering, the offering-communication rules govern. Reg FD is the rulebook for the issuer's ordinary investor-relations communications between offerings.
- Reg FD reaches selective disclosure to securities market professionals AND to holders likely to trade. Disclosing MNPI to a large index-fund holder unlikely to trade is less obviously a problem than disclosing it to an actively trading hedge-fund holder.
Intentional vs. Non-Intentional Disclosure
The regulation distinguishes between intentional and non-intentional selective disclosure.
| Disclosure Type | Definition | Public Disclosure Timing |
|---|---|---|
| Intentional | Person making the disclosure knows, or is reckless in not knowing, that the information is both material and nonpublic | Simultaneously with the selective disclosure |
| Non-intentional | Person making the disclosure does not know and is not reckless in not knowing the information is material and nonpublic | Promptly (as soon as reasonably practicable, and in any event within 24 hours or before the next opening of the New York Stock Exchange (NYSE), whichever is later) |
The intentional / non-intentional distinction governs the speed of the cure. An intentional selective disclosure has to be cured at the same moment it happens (publicly disclose simultaneously). A non-intentional selective disclosure has to be cured promptly once the issuer realizes it occurred.
Exam Tip: Gotchas
- Intentional = simultaneously; non-intentional = promptly (24 hours or next NYSE open, whichever is LATER). The "later of" clause is what gets tested: a non-intentional disclosure on a Friday after the NYSE close has until the NYSE opens Monday, not until Saturday.
- "Reckless in not knowing" is the standard for intentional disclosure. Conscious indifference to whether the information is material and nonpublic counts as intentional, even if the speaker did not actually know.
Methods of Public Disclosure
The regulation specifies how public disclosure may be made.
- Filing or furnishing a Form 8-K with the SEC, OR
- Another method reasonably designed to effect broad, non-exclusionary distribution of the information to the public (a widely accessible webcast, a press release distributed on the wires, a posting on the issuer's investor-relations website that has been pre-noticed as a regular disclosure channel)
The broad-distribution requirement is the operative phrase. A method that distributes the information to a subset of investors (an invitation-only conference call without parallel public access, for example) does not satisfy the rule even if the call is recorded.
Exam Tip: Gotchas
- Form 8-K is the safest disclosure method. Other methods can satisfy the rule but must be reasonably designed to reach the public broadly. An invitation-only call is not broad distribution.
- An issuer's investor-relations website CAN be a Reg FD disclosure channel if it has been pre-noticed as such. Pre-noticing the channel (in advance, in the company's filings) is what makes the channel "reasonably designed" to reach the public broadly.
Practical Examples
The classic Reg FD trip wires:
- Earnings preview leaks: a CFO drops a hint about an upcoming earnings beat on a one-on-one call with an analyst before the public disclosure
- Guidance updates: an executive tells a buy-side analyst that quarterly revenue will land at the high end of the range, without disclosing the same information publicly at the same time
- Material strategic decisions: a CEO mentions a pending acquisition on a tour stop with select institutional investors
- Earnings call follow-ups: a head of investor relations clarifies a guidance comment for a single analyst after the earnings call has ended
Each of these scenarios requires the issuer to disclose the same MNPI publicly: simultaneously if the disclosure was intentional, or promptly (within 24 hours or before the next NYSE opening, whichever is later) if non-intentional.
Exam Tip: Gotchas
- The intent test is about KNOWLEDGE of materiality and nonpublic status, not about whether the speaker meant to violate the rule. A CFO who consciously discloses information believing in good faith it is immaterial may still be liable if the conclusion was reckless.
- Holders likely to TRADE are covered; holders unlikely to trade are not. The scope is targeted at the disclosure pathway most likely to produce informed trading ahead of public release.
Think of it this way: Reg FD treats the reporting issuer's MNPI like water in a sealed tank. If the issuer opens a valve to release the water to one analyst (or one large holder likely to trade), the same valve must release the same water to the public at the same time, or as quickly afterward as the issuer can manage. Intentional releases require simultaneous public disclosure. Accidental drips require prompt cleanup. The rule prevents one group of investors from drinking from the tank ahead of everyone else.