DEFINITION of 'Regulation Fair Disclosure (Reg FD)'

Regulation Fair Disclosure (Reg FD) is a rule passed by the Securities and Exchange Commission in an effort to prevent selective disclosure by public companies to market professionals and certain shareholders.

Reg FD states that when a publicly traded company or issuer of stock discloses any material nonpublic information regarding that issuer or its securities to a limited group of individuals, the issuer must make public disclosure of that information. Such disclosures must be made simultaneously if it is an intentional release of information. Non-intentional sharing of such information must be promptly followed with public disclosures.

BREAKING DOWN 'Regulation Fair Disclosure (Reg FD)'

Many companies in the past released important information in meetings and conference calls where shareholders and the general public were excluded. The goal of Reg FD is to level the playing field between individual investors and institutional investors.

Reg FD was created in response to instances when issuers of stock gave advance warnings of earnings results and other nonpublic information to selected institutional investors and analysts. This created circumstances that allowed those with the information to make a profit or avoid losses at the expense of the rest of the investing community.

Why Regulation Fair Disclosure Was Introduced

Concerns arose about loss of confidence in the integrity of market because of unfair disclosure practices. The sharing of nonpublic information with select groups could also border on examples of insider trading.

Reg FD is limited in how it may be applied. The rule does not cover all communications made with individuals outside the issuer. The regulation applies specifically to communications and interactions with securities market professionals. It also applies to holders of the issuer's securities in situations where it is likely and reasonably possible that the information will influence their trading activity.

The individuals who fall under the authority of Reg FD include senior officials with an issuer and others who engage in regular communication with securities holders and securities market professionals. This allows companies to continue to make disclosures to the media or issue standard business communications such as press releases.

Publicly traded companies may conduct earnings and forecast calls to inform analysts who follow their stock about recent developments and plans. Those conference calls are matched with simultaneously issued press releases of the statements made by the company during those calls. Recordings of the calls are also made available after the sessions end to give anyone in the public the chance to hear the comments that were made. The company may also file Form 8-K with the SEC to provide public disclosure of the information that was shared.

  1. Disclosure

    Disclosure is the act of releasing all relevant company information ...
  2. Regulation D (Reg D)

    Regulation D (Reg D) is a regulation that allows smaller companies ...
  3. Adequate Disclosure

    Adequate disclosure is an accounting concept confirming that ...
  4. SEC Form 8-K12G3

    SEC Form 8-K12G3 is an initial filing for the notification of ...
  5. Recycle Ratio

    Recycle ratio is a key profit measure of the oil and gas industry ...
  6. Division of Investment Management

    The Division of Investment Management, a division with the SEC, ...
Related Articles
  1. Personal Finance

    Reg AC: What Does It Mean To Investors?

    In 2003, the SEC issued a new regulation meant to hold analysts more accountable for their reports. Find out what it means.
  2. Managing Wealth

    Asset Manager Ethics: Disclosures

    Effective communication and disclosures go a long way towards easing minds and creating a lasting and trusting symbiotic relationship. Here are the four steps to making good disclosures.
  3. Investing

    Active Investment Management Misses The Mark

    Active investment management offers little advantage in the secondary capital markets.
  4. Investing

    Footnotes: Early Warning Signs For Investors

    These documents hold very important information, but reading them takes skill.
  5. Tech

    How The SEC Regulates Social Media

    The SEC continues to develop requirements and regulations to reflect the new information age.
  6. Investing

    Earnings Guidance: Can It Predict the Future?

    Explore the controversies surrounding companies commenting on their forward-looking expectations.
  7. Personal Finance

    Policing The Securities Market: An Overview Of The SEC

    Find out how this regulatory body protects the rights of investors.
  8. Insights

    Why Insider Trading Is Bad for Financial Markets

    Insider trading can come in many forms, some of them even legal, with the benefits and costs often debated by practitioners and academics alike.
  9. Trading

    For Individual Investors, These May Be The Best Of Times

    The raging debate on high frequency trading may lead the average retail investor to think that he/she continues to get a raw deal in the stock market. The reality is that these are probably the ...
  10. Investing

    Why Financial Statements Are Harder to Read Than Ever Before

    Understand four major reasons that financial statements published in 2016 are more complicated and difficult to read than they were in the past.
  1. Is a private company required to show financial information?

    Understand whether a private company is required to disclose financial information to the public. Learn what is required ... Read Answer >>
  2. How do a consumer disclosure and credit report differ?

    Find out how consumer disclosures and credit reports are different, even though they contain similar information. Learn how ... Read Answer >>
  3. What is the difference between a summary prospectus and an offering memorandum?

    Understand what investments require a summary prospectus or a offering memorandum, and learn the differences between the ... Read Answer >>
Trading Center