The Enforcement Of Regulation Fair Disclosure Essay

771 Words4 Pages
Prior to the enforcement of Regulation Fair Disclosure (FD), many public companies are revealing important nonpublic information to institutional investors or financial analysts, before disclose such information to the public. When this happened, those people who gain insight information can take advantage of others by buying or selling shares of the company beforehand. As a result, on October 23, 2000, the Securities and Exchange Commission (SEC) introduced the enforcement of Regulation Fair Disclosure (FD) to prevent the selective disclosure of information by publicly traded companies, which requires public companies to disclose material information as releases to financial analysts or others to the public at the same time. Consequently, insider trading becomes an alternative way by which a firm can pass on private information to financial analyst about the company’s future earnings. Because analysts are people who investors usually rely on for earnings forecasts. As (Schipper and Katherine, 1991) describes how analysts, as informed intermediaries, can provide insights into the activities and beliefs of investors that cannot be observed directly. Insider trading is when people, who have access to private information about the company, i.e. executives, managers or key employees, purchase or sales, stocks of the company, which is considered as unfair trading to other investors who do not have access to this information. Therefore, the main purpose of this study is
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