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Regulation FD

In October 2000, a new SEC rule, Regulation FD (Fair Disclosure) outlawed selective disclosure of all material financial information. Prior to Reg. FD, corporations would routinely disclose important information, such as whether they would likely meet, beat, or come in below existing earnings forecasts to favored analysts. Other analysts might hear the same news later, if at all. Individual investors were shut out.

Reg. FD shut down that game and now most firms announce such changes in guidance via a press release, in a conference call open to the public, or both. Consensus forecasts change immediately since all analysts get the same news at the same time. Consequently, changes in guidance have the same effect on a stock price as an earnings surprise. However, so far as I know, nobody is tracking management guidance changes in the same way that surprises are tabulated.


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