Regulation Fair Disclosure

Regulation FD (Fair Disclosure), ordinarily referred to as Regulation FD or Reg FD, is a regulation that was promulgated by the U.S. Securities and Exchange Commission (SEC) in August 2000. The regulation is codified as 17 C.F.R. 243. Although 'FD' stands for 'fair disclosure,' as can be learned from the adopting release, the regulation was and is codified in the Code of Federal Regulations simply as Regulation FD. Subject to certain limited exceptions, the rules generally prohibit public companies from disclosing previously nonpublic, material information to certain parties unless the information is distributed to the public first or simultaneously. Regulation FD (Fair Disclosure), ordinarily referred to as Regulation FD or Reg FD, is a regulation that was promulgated by the U.S. Securities and Exchange Commission (SEC) in August 2000. The regulation is codified as 17 C.F.R. 243. Although 'FD' stands for 'fair disclosure,' as can be learned from the adopting release, the regulation was and is codified in the Code of Federal Regulations simply as Regulation FD. Subject to certain limited exceptions, the rules generally prohibit public companies from disclosing previously nonpublic, material information to certain parties unless the information is distributed to the public first or simultaneously. The regulation sought to stamp out selective disclosure, in which some investors (often large institutional investors) received market moving information before others (often smaller, individual investors), and were allowed to trade on it. Under Regulation FD, selective disclosure may be made so long as the company first collects a confidentiality agreement from the other party (or the other party is already subject to a duty of trust and confidence). Although the agreement need not include an undertaking not to trade on the information, the regulation was heavily driven by a desire to make it easier to prosecute recipients of selective information for insider trading, because in many instances only persons who owe such a duty are subject to such prosecution. Thus, the SEC explained in the Proposing Release: 'To make clear the scope of the Regulation, paragraph (b) of Rule 100 expressly states that the Rule does not apply to disclosures of material information to persons who are bound by duties of trust or confidence not to disclose or use the information for trading. Paragraph (b) expressly refers to several types of persons whose misuse of the information would subject them to insider trading liability under Rule 10b-5: (1) 'temporary' insiders of an issuer – e.g., outside consultants, such as its attorneys, investment bankers, or accountants;42 and (2) any other person who has expressly agreed to maintain the information in confidence, and whose misuse of the information for trading would thus be covered either under the 'temporary insider' or 'misappropriation' theory.'