Last week, we wrote about Regulation FD, now in its 13th year of implementation, and offered Part One of a quiz designed to test how well you understand the regulation. Here, we offer a slightly more challenging Part Two of the quiz. We hope you will find this helpful as you think about real life Reg FD situations. Since the following answers should not be construed as legal advice, we also urge you to talk with your legal counsel before deciding what practices are best for your company and its particular disclosure situations.
Reg FD Quiz, Part Two- Violation or Not?
1. CEO is aware that your company will likely miss quarter consensus estimates, but this hasn’t been disclosed. CEO looks downtrodden in 1×1 meeting, and talks about what a tough macro environment it has been for the industry. A week later, your company announces lower than expected revenues. Stock trades down sharply on higher than normal volume.
Did the CEO violate Reg FD? (YES) The CEO selectively disclosed material, non-public information through non-verbal cues. Hindsight is perfect; hold a poker face or don’t talk.
2. At a webcasted analyst day, management outlines its new product pipeline, how the products compare to existing technologies and treatments and the timeline for product launches. Two weeks later, in a 1×1 meeting with an investor who missed the analyst meeting, management answers questions about how some of the new products differ from competition.