The term fair disclosure refers to regulations that outline how publicly-traded companies need to disclose material, non-public information to all investors. This fair disclosure rule, also known as Regulation FD, aims to eliminate selective disclosure; whereby companies oftentimes shared information with large institutional investors before making the information available to smaller groups or individual investors.
Back in August 2000, the Securities and Exchange Commission implemented Regulation FD to eliminate instances of selected disclosure of material, non-public information by publicly traded companies and other issuers of securities. Fair disclosure regulations state that when an issuer or person acting on its behalf:
- Discloses material, non-public information to certain entities such as securities professionals, market analysts, or other holders of the issuer's securities that may trade on the basis of this information;
- The issuer must make simultaneous disclosure of such information to the public when the disclosure is intentional, or promptly if the disclosure was non-intentional.
The above rules were established by the SEC to ensure more transparency with respect to the communication of material, non-public information; thereby eliminating any advantage an institutional investor possessing this information might have relative to individual investors.
In 2008, the SEC ruled that companies could use their corporate websites to comply with the above rules. For example, companies can use their websites to simultaneously disclose information to the public when having earnings conference calls with market analysts.
In April 2013, the SEC expanded the use of the internet to disclose this information when it ruled companies could use social media to share information as long as the social media platform was not restricted, and investors were informed which social media platform would be used to communicate this information.