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Thursday, August 10, 2000 The SEC Gives the Nod to Reg FD The Securities and Exchange Commission today approved the selective disclosure rule known as Regulation FD. The rule had been opposed by the Investment Company Institute as many fund companies fear the rule will harm their analysts' access to company officers. Yesterday, the Wall Street Journal profiled a letter from Janus Capital to the SEC in which it voiced its opposition. Regulation FD covers selective disclosure by issuers of material nonpublic information, when insider trading liability arises in connection with a trader's "use" or "knowing possession" of material nonpublic information and when the breach of a duty of trust or confidence in a family or other non-business relationship gives rise to liability under the misappropriation theory of insider trading. The SEC also approved two new rules that are intended to clarify existing insider trading law. Chairman Arthur Levitt said that the Commission received more than 6,000 comment letters from the public and that most were from individual investors concerned about fairness in the markets. He added that the final rule reflects issues raised during the comment process by securities industry professionals, issuers, lawyers, media representatives, and professional and trade associations. "Now, various investment professionals have argued that Regulation FD might 'chill' the flow of information as some companies, fearful of legal liability, respond by providing less disclosure altogether. Many of the concerns raised in the comment letters were thoughtful and valid. I firmly believe, however, that the rules before us today address these concerns," said Levitt. The changes that narrowed the scope of the regulation include: Rule of Disclosure that Does Not Create Private Liability Requirement of Intentional or Reckless Conduct No Application to Most Registered Offerings or Foreign Issuers No Affect on Eligibility for Short-Form Registration or Resales under Rule 144 The new insider trading rules (10b5-1 and 10b5-2) cover the "Use/Possession" issue and clarify "duties of trust or confidence in misappropriation cases." Levitt said the rules will addresses "the important but unsettled question of whether insider trading liability arises when a person trades while "aware" of material nonpublic information" and the second will clarify "what types of family or other non-business relationships can give rise to liability under the misappropriation theory of insider trading." Printed from: MFWire.com/story.asp?s=25850 Copyright 2000, InvestmentWires, Inc. All Rights Reserved |