Boards and Regulation Fair Disclosure (Reg FD)

As investors expect more and more direct engagement with board members, directors express greater concern about staying in compliance with Regulation Fair Disclosure (Reg FD). The U.S. Securities and Exchange Commission (SEC) adopted Reg FD in October 2000 in order “to address the selective disclosure of material nonpublic information by issuers and to clarify two issues under the law of insider trading” related to liability. Reg FD applies to any communication between a director and a shareholder and was meant to “enhance existing prohibitions against insider trading.” This memo outlines guiding principles for communicating with shareholders in compliance with Reg FD. 

Q: One of our major investors wants to meet with the board to discuss the company’s strategy. How can we communicate with this investor without violating Reg FD? 

A: The Impact of Reg FD on Director-Shareholder Communication 

NACD encourages communication between directors and investors and regards Reg FD not as a barrier to communication but rather as a boundary that defines its scope. As the Report of the NACD Blue Ribbon Commission on Board-Shareholder Communications states, “At the most fundamental level, Reg FD does not prevent directors from listening to shareholder concerns, and listening is an important aspect of high-quality communication” (p. 21).