Fair disclosure (SEC Regulation FD)

Fair disclosure is providing information to all parties at one time. The Securities and Exchange Commission’s (SEC) Regulation FD, effective October 2000, is designed to eliminate “selective disclosure” of financial information by officials of publicly traded corporations in the United States. Historically, stock market analysts “cover” stocks in particular industries, analyzing trends, making predictions about future profitability, and offering recommendations to investors. These Wall Street insiders get to know managers and officials of the companies they cover and are often provided reports from and interviews with company executives, thus obtaining information in advance of individual traders in the marketplace. For decades this was standard practice on Wall Street, but with the advantage of on-line trading and the huge increase in individual traders, non-Wall Street investors complained about the unfair advantage given to industry analysts and the firms they represented.
In addition to eliminating selective disclosure, the fair disclosure regulation, as SEC Regulation FD is known, also addresses “analyst independence,” recognizing that the firms analysts work for often have other business relationships with the companies they evaluate. The SEC and the Securities Industry Association direct stock market firms to separate analysts’ pay from other relationships with the companies they cover.
The fair disclosure guidelines provide flexibility for companies to comply with disclosure requirements. The guidelines allow companies to issue press releases through conventional media and encourage firms to announce in advance website disclosures and teleconferencing announcements. Companies continue to have investor conferences, but with the new fair disclosure rules, all information provided at these conferences must also be made available to the general investing public.