(October 20 – 16:30 ET) – The U.S. Securities Exchange Commission’s new fair disclosure regulation will take effect on Monday. The new rule will prohibit the past practice of making selctive disclosure to certain analysts.
The SEC regulation states that CEOs who disclose “material information” in a meeting with analysts, even if they didn’t intend to, will be deemed to be violating the rule. It says reckless disclosure will be deemed intentional.
If an issuer wants to make public disclosure of material nonpublic information in a conference call, it must give adequate advance notice of the call and inform the public about how they can participate and how long the call will be available online or in transcript form.
Issuers can not satisfy the new regulation if they disclosing news at a shareholder meeting which is open to all shareholders, but not the public. Disclosing information in public filings such as proxy circulars does count as adequate disclosure although the SEC cautions issuers to “take care to bring the disclosure to the attention of readers of the document.”
Issuers must not “bury the information, and must not make the disclosure in a piecemeal fashion throughout the filing.
Issuers can review and privately comment on an analyst’s model without violating the rule as long as they don’t make any material disclosures in doing so. They may also disclose material info to analysts as long as they promise to keep it quiet until public disclosure is made.
Firms can also disclose material info to its employees, who may also be shareholders, without making public disclosure of the information.
A company can also selectively confirm a previously announced forecast, as long as that confirmation is not material. It remains up to issuers to determine materiality.
-IE Staff