On August 10, 2000, the Securities and Exchange Commission (SEC) adopted Regulation FD (Fair Disclosure) in order to promote the full and fair disclosure of information by issuers. Regulation FD, which will become effective on October 23, 2000, targets the perceived problem of "selective disclosure"--when a company makes material nonpublic information available to selected persons, such as securities analysts or institutional investors, who could be expected to trade on the basis of such information before the information is disclosed to the general public.

The new rule requires an issuer to disclose material information publicly and not selectively to market professionals or securities holders. When selective disclosure is made unintentionally, the company must provide for broad dissemination of the information promptly after it knows (or was reckless in not knowing) that the disclosure of material nonpublic information was made. Accordingly, the regulation applies only to intentional or reckless disclosure of material nonpublic information; no liability would arise where a company discloses information that it mistakenly determines not to be material.

The public disclosure requirement may be met by filing the information with the SEC in a Form 8-K or by another method intended to reach the public on a broad, nonexclusionary basis, such as a press release, broadly accessible conference call or Webcast. However, a Web site posting alone is not sufficient.

Regulation FD applies only to an issuer's communications with market professionals, including broker-dealers, investment advisers and investment companies, and with any holder of the issuer's securities where it is reasonably foreseeable that the holders will trade on the basis of the information. Generally, the rule will not apply to issuer communications with the press, ordinary-course business communications with customers and suppliers, or communications to government agencies. The rule identifies four categories of communication that do not trigger the public disclosure requirements: (1) to a person who owes the issuer a duty of trust or confidence, such as an attorney, investment banker or accountant; (2) to a person who expressly agrees to keep the information confidential; (3) to credit-rating agencies if the disclosure is solely for the purpose of developing a credit rating; and (4) in connection with a registered offering under the Securities Act of 1933. Statements made in connection with unregistered offerings, such as private placements under Rule 144A, are not exempt.

Regulation FD applies only to communications by the issuer's senior management, its investor relations professionals and others who regularly communicate with market professionals and securities holders.

Regulation FD does not create liability for fraud under Rule 10b-5 or private liability for selective disclosure, nor will a violation jeopardize the issuer's eligibility for short-form S-3 registration or affect the ability to sell under Rule 144. When an issuer fails to comply, the SEC could bring an administrative proceeding seeking a cease and desist order, or a civil action seeking an injunction or civil penalties against violators.

The impact of Regulation FD must be considered by companies before any communications with analysts and investors that are not open to the general public, such as providing "guidance" on earnings and background discussions prior to earnings releases.

By adopting Regulation FD, the SEC is strongly encouraging companies to use new technologies, such as broad (open) access conference calls and Webcasts, in disseminating material information.