For many years, Regulation FD has dominated the analysis of how and when a company should disclose material information. As a result, complying with the stock exchanges’ timely alert rules can get lost in the shuffle. Scenarios that can cause problems are events occurring during a trading day, such as investor meetings, earnings calls and industry conferences, as well as unexpected midday developments.
Most meetings and calls are well-choreographed in advance so that there are no major surprises during the trading day. The common, and recommended, practice is to pre-release the material information in a manner that complies with Regulation FD (press release and/or Form 8-K) outside of trading hours so that the market has time to absorb the information before trading begins.
Occasionally, however, events may require that companies disclose previously unannounced information during the trading day. Again, most companies know to immediately issue a press release and/or file a Form 8-K under such circumstances. It is important to remember, however, that the New York Stock Exchange and Nasdaq have very specific “timely alert” rules requiring that they be separately notified ten minutes prior to the release of any such information during a trading day. This gives them the chance to determine if trading should be halted, and for how long, to allow the information to be absorbed by the market, which preserves orderly trading.
In NYSE’s case, notice of material information must be given ten minutes before any release between 9 a.m. and 4:00 p.m. Nasdaq’s rule is more expansive, requiring ten-minute prior notice between 7 a.m. and 8 p.m.
Don’t allow laser focus on Regulation FD and the exigencies of a midday disclosure to push stock exchange timely alert compliance out of the picture. Egregious or repeated violations of the exchange rules could result in an embarrassing public reprimand letter (which probably must be disclosed on Form 8-K), or even worse.