Client Alert

SEC Commissioner Laura Unger Issues Special Study on Regulation FD

12/12/2001

When Regulation FD was adopted in August 2000, the Securities and Exchange ("SEC") Commissioners agreed to study the Regulation's effect on the marketplace. On December 6, 2001, SEC Commissioner Laura Unger issued a report examining the impact of the Regulation (see the "Report" on the SEC website). The Report makes three recommendations:

  • The SEC should provide companies with clearer guidance of what types of information should be considered material. This guidance should focus on clarifying the meaning of "earnings information" as used in the Regulation FD Adopting Release.
  • The SEC should allow issuers greater use of technology (e.g. website posting) to comply with the disclosure and dissemination requirements of Regulation FD. In addition, the SEC should pressure the Self Regulatory Organizations, like the New York Stock Exchange, to amend their information dissemination requirements to be more in harmony with the disclosure requirements of Regulation FD.
  • The SEC should closely examine the marketplace to see what impact Regulation FD has had on depth and quality of corporate communications. If the SEC determines that Regulation FD has had a chilling effect on forward-looking information, it should consider using its authority under the Private Securities Litigation Reform Act of 1995 to expand the safe harbor to encourage more forward-looking disclosure.

What is the significance of this Report and its recommendations? No changes to Regulation FD have been formally proposed. The author of the Report, Commissioner Unger is leaving the SEC at the end of this year. After Commissioner Unger's departure, three of the five SEC Commissioner positions will be vacant. The Report expressly says that "[t]he Commission and other Commissioners have expressed no views regarding the analysis, findings, conclusions, or recommendations" contained in the Report, so it is unclear whether the remaining two SEC Commissioners, Isaac Hunt or Chairman Harvey Pitt, endorse the Report. Presently, it is uncertain whether the Report will ever evolve into changes to Regulation FD.

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