Reg FD, Earnings Calls, and Guidance

Objective: Apply Regulation Fair Disclosure (Reg FD) to selective disclosure, earnings calls, and forward-looking guidance, including the deadline for correcting an unintentional disclosure.

Why Reg FD matters

Business Acumen for Strategic Communicators: A Primer, Ch. 7–9 explains that timely, accurate, and truthful information is essential to fair markets. The text describes how securities regulation developed in response to unfair advantages and hidden insider behavior, with the goal of creating a more balanced playing field for investors. Reg FD fits this purpose by limiting selective disclosure of important company information.

Core Reg FD principle: no selective disclosure of material information

Under Reg FD, a public company should not give material, nonpublic information to a select group of investors, analysts, or others before the broader market has access to it. The practical lesson is simple:

• If information is material, it should be shared in a way that makes it available broadly.
• If information is shared only with a limited audience, the company risks selective disclosure concerns.

Drawing on Business Acumen for Strategic Communicators: A Primer, Ch. 7–9, communicators should treat fair access to information as a market-integrity issue, not just a messaging preference.

Earnings calls

The source highlights the importance of understanding “what was shared on the most recent quarterly earnings calls” in evaluating a public company. Earnings calls are therefore a major disclosure setting. From a Reg FD perspective, they should be handled so that investors can access the information broadly rather than only through a private audience.

In practice, that means companies should structure earnings communications to support wide public availability, for example through open access methods customarily used for investor communications.

• Earnings calls often include material business and financial information.
• Because of that, they must be planned carefully to avoid selective disclosure.
• Investor relations and communications teams should coordinate closely on scripts, Q&A preparation, and access logistics.

Forward-looking guidance

Business Acumen for Strategic Communicators: A Primer, Ch. 7–9 defines earnings guidance as the practice of public companies broadly disclosing expectations about future financial and business performance to investors and other stakeholders. More than 9 out of 10 (94%) US public companies provide some form of guidance, most commonly on revenue, tax rate, capital expenditures, earnings/EPS and operating expense margins. Because guidance is broadly disclosed, it should not be given selectively to favored audiences.

The source also notes that there is litigation risk when companies provide guidance and then fall short of it. The Private Securities Litigation Reform Act of 1995 helps stem the filing of frivolous or unwarranted securities lawsuits, including suits involving a public company missing a previously released forecast.

Separately, whenever a public company makes a forward-looking statement, such as providing guidance, it should include safe harbor language. This language outlines company-specific risk factors that could materially impact the firm’s future financial performance. It is typically read before the start of earnings conference calls and investor presentations, and it is also included at the front of slide decks and at the bottom of earnings releases.

If executives discuss future expectations, those statements should be made through broadly accessible channels. Communicators should also ensure consistency between guidance, earnings materials, and other corporate disclosures.

Unintentional disclosure: correction deadline

The lesson’s key rule is that if a company makes an unauthorized or inadvertent selective disclosure of material information, it must promptly take corrective action by broadly disclosing the information via an 8-K filing and/or a news release. According to the source:

• “Promptly” typically means as soon as reasonably practical, but
• no later than the later of 24 hours or the start of the next day’s trading.

This is the critical timing rule to apply in scenario questions about accidental slips during analyst meetings, private calls, or conference discussions.

Social media and Reg FD

Business Acumen for Strategic Communicators: A Primer, Ch. 7–9 notes that the SEC has become more accepting of social media for corporate disclosure if investors have been properly alerted that a social media channel may be used for that purpose. The source gives the example of Netflix CEO and co-founder Reed Hastings, who caused a stir in 2013 when he used his personal Facebook page to share a key Netflix viewership milestone that had not been previously reported through Netflix corporate communication channels. After opening an inquiry, the SEC declined to bring an enforcement action against Hastings and Netflix. Instead, the SEC used the case to provide clarification on Reg FD, including how social media channels may be used for disclosure.

The takeaway is not that any executive post is automatically compliant. Rather:

• Social media may be used for material disclosures.
• Investors must first be told that the company may use those channels for disclosure.
• The channel must function as a broadly accessible means of communication.

How to apply the rule in common situations

• Private analyst call: Do not share new material information unless it has already been publicly disclosed or is simultaneously disclosed broadly.
• Earnings call preparation: Assume financial results, trends, and outlook may be material; prepare for broad access and disciplined Q&A, and read the safe harbor language before the call begins.
• Guidance update at a conference: If the update is material, avoid giving it only to attendees unless the public has equivalent access.
• Accidental executive slip: Move quickly to disclose broadly via an 8-K filing and/or a news release within the Reg FD deadline for unintentional disclosures.
• Social post by an executive: Use only channels the market has been told to monitor for corporate disclosure.

Key takeaways

• Reg FD is designed to prevent selective disclosure and support a fair market.
• Earnings calls are a central disclosure event and must be managed with broad investor access in mind.
• Forward-looking guidance can be material and should not be shared selectively; forward-looking statements should carry safe harbor language outlining company-specific risk factors.
• The Private Securities Litigation Reform Act of 1995 helps stem frivolous or unwarranted securities lawsuits, including suits over a missed forecast.
• Unintentional selective disclosure must be corrected promptly via an 8-K filing and/or a news release: as soon as reasonably practical, but no later than the later of 24 hours or the start of the next day’s trading.
• Social media can be used for disclosure if investors have been told to look there.