Reg FD: Your Brand’s Firewall Against ‘Selective Disclosure’
For modern firms in digital media, tech, and high-growth sectors, the rules of corporate communication are simple but merciless: fair disclosure.
The heart of Regulation Fair Disclosure (Reg FD), established by the SEC, serves as a company’s ‘firewall’ against selective disclosure. Under Reg FD, all investors must have simultaneous and equal access to "material" corporate information.
Two Pillars of Compliance
Fair Compliance hinges on two factors: the nature of the information and the manner of its release.
1. Defining Material Non-Public Information (MNPI)
MNPI is the tripwire. It is anything a reasonable investor would consider vital to their investment decision. If the information could reasonably move the stock price or substantially affect a company's financial standing, it is material.
2. Tracing the Source: When Rumor Becomes Risk
A Reg FD violation is directly traceable. It occurs when MNPI originates from a tipper (a company source) or an agent acting on the company's behalf and is selectively communicated.
Industry gossip or speculation, generally, does not trigger Reg FD because it lacks a definitive company source. However, if that rumor can be traced back to a private call with an executive, the liability is activated.
The Dual Threat: Reg FD and Insider Trading
Indeed, failing on Fair Disclosure creates a severe, compounding risk for taking on insider trading liability.
If the recipient of the selectively-disclosed MNPI then trades or leaks that information for personal or market gain, they have misused the information. This act is a form of insider trading, creating a parallel liability that compounds the initial disclosure failure.
For executives and their brands, the goal is not just to avoid the fine—but to eliminate the potential for the misuse of MNPI, which is the fastest way to invite an SEC investigation and permanently damage the corporate reputation.
Need to audit your communication protocols?
Rossow Law helps solo-practitioners and firms in high-risk, high-velocity markets implement strict, legally-sound disclosure policies that protect capital and brand integrity. Contact us today to audit your MNPI disclosure strategy!
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