A brief history of Regulation Fair Disclosure
Before the passage of Reg FD, individual investors were often the last to learn the details of new products, receive warnings about earnings shortfalls, or be notified about management changes. Professional financial institutions enjoyed substantial information advantages and were often the same entities delivering financial news to rest of the marketplace. The investing arms of these institutions profited by using not yet public information to make stock purchase and sale decisions.
In October 2000, the SEC ruled that selective disclosures violate the spirit of public markets and implemented Regulation Fair Disclosure. Many influential players in the financial services industry strenuously objected and claimed that Regulation FD increases stock market volatility, stifles corporate disclosure, erodes the relationships between public companies and their financiers, and reduces the quality of available information.
But Regulation FD was hailed as a huge victory for individual investors, and one factor that led to the rule's passage was their overwhelming support. The SEC received thousands of comments from investors, making the public response to Reg FD the largest the agency had ever experienced at that time. Many of those responses were submitted to the SEC through The Motley Fool, with 65% of the letters coming from Fools.
Then-SEC Chairman Arthur Levitt, who visited Fool headquarters shortly after Reg FD was passed, told The Wall Street Journal that Regulation FD would have never happened without the support from Fools. "They come as close to being an effective investor advocate as any organization in America," he said.
