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• Author: LLOYD, BRIAN
• Position: Regulation Fair Disclosure and Utah - Brief Article

Fair Disclosure Law

On October 23, 2000 the Securities and Exchange Commission adopted Regulation Fair Disclosure (Regulation FD) which requires public companies to provide investors with equal access to material information and prohibits selective disclosure of such information to financial analysts and other industry professionals. The regulation is designed to "level the playing field" between analysts, financial institutions and smaller investors.

Regulation FD has forced many Utah public companies to reexamine and restructure their dealings with financial industry professionals. Prior to Regulation FD, many public companies periodically reviewed analysts' estimates and provided individual guidance in an effort to keep forecasts from going too far afield. With the implementation of Regulation FD, quarterly earnings calls, which used to be open to a select few, must now be open to the public, and the content of one-on-one communications between companies and analysts will be severely limited.

While the basic principles of Regulation FD are straightforward, adhering to these principles on a daily basis may be difficult for company officers.

"The challenge that companies face with Regulation FD is changing the mindset of financial professionals," says David Politis, president of Politis Communications. "Investors, brokers, dealers and analysts are used to calling up a company and asking, 'How does the quarter look?' Now, companies are required to respond with statements like, 'Unfortunately, because of Regulation FD, I can't provide you with any direction."'

Smaller Utah public companies may be the most adversely affected by Regulation FD. Large established companies are usually covered by several analysts, and a significant amount of information is publicly available regarding these businesses. Since smaller public companies often have a limited investor following, there is less incentive for analysts...