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← Series 79: Section 4
Series 79 practice questionmediumMNPI and Insider Trading

Regulation FD (Fair Disclosure) requires that when an issuer discloses material nonpublic information to certain market professionals, it must simultaneously make the information available to the public. Which of the following situations would trigger Regulation FD?

  1. AA CEO selectively discloses projected quarterly earnings to a group of favored analysts during a private meeting✓ Correct answer
  2. BAn issuer provides confidential information to its outside legal counsel for purposes of obtaining legal advice
  3. CAn issuer shares MNPI with a credit rating agency solely for the purpose of obtaining a credit rating
  4. DA company discloses material information to an acquiring company under a confidentiality agreement in connection with a negotiated transaction
Explanation

Why A — A CEO selectively discloses projected quarterly earnings to a group of favored analysts during a private meeting

Regulation FD is triggered when an issuer or person acting on its behalf selectively discloses material nonpublic information to securities market professionals or shareholders who may trade on the information. Selectively sharing earnings projections with favored analysts is precisely the type of conduct Regulation FD was designed to prevent. Exceptions exist for disclosures to legal counsel, credit rating agencies acting in their rating capacity, and parties bound by confidentiality agreements in business transactions.

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