Tag Archives: Form 8-K

What is Fair Disclosure under Regulation FD?

Regulation FD is a public company disclosure rule designed to address selective disclosure.  The theory behind Regulation FD is to prevent insider trading by promoting the full and fair disclosure of material non public information.

When a public company discloses material nonpublic information to shareholders or market professionals, (who may trade on that information) that the company must also make public disclosure of the same material information.

How is Public Disclosure Made Under Regulation FD?

Under Regulation FD, the required public disclosure is generally made by filing an 8-K, but it is possible for an Issuer to follow the spirit of the regulation through a combination of other methods if the same information is disseminated.

When Must Disclosure Be Made Under Regulation FD?

Under Regulation FD, the timing of the required public disclosure depends on whether the selective disclosure was intentional.  If the selective disclosure is intentional, the public company must make public disclosure at the same time.   In the case of a non-intentional disclosure, the Issuer must promptly make disclosure to the public.

 

When Does an Issuer Need to File an 8-K?

An 8-K is Filed When Something Material Happens

One of the most often asked questions of a securities attorney is when an Issuer is required to file an 8-K.  There is a laundry list of specific events that require the filing available at SEC.gov and on the Form 8-K itself.  But it is helpful for management of small public “bulletin board” companies, listed on the OTCMarkets OTCQB, to look at these requirements as more of an opportunity to both document and share news, instead of trying to find a way “not to file” to avoid administrative hassle and costs.

The short answer is whenever there is a material development or the occurrence of an “event” that the Issuer’s shareholders (and the investing public) should know about.  These material events may differ greatly when comparing a development stage, micro cap company with Google or Microsoft, and therefore it likely that a development stage company should actually be filing more 8-Ks if it is actively operating.

Microcap Issuers Should Provide As Much Information As Possible to Shareholders

At the Law Office of Matheau J. W. Stout, Esq., we advise our OTCQB and OTCBB microcap public company clients to err on the side of full disclosure, and if there is a doubt as to whether or not the transaction or event is “material” the Issuer should file the 8-K.  Simply put, there is no penalty for providing shareholders with too much information (“TMI”) as long as that information is accurate and the SEC appreciates those public companies which go above and beyond in communicating with their shareholders.

File an 8-K When News Goes Out In a Press Release

Although it may seem obvious, quite often, development stage OTCQB and bulletin board public companies are so eager to issue good news to the public through press releases that they forget to file the 8-K.  In general, if the news is press release worthy, it might very well be considered material, and there should be an 8-K filed within four (4) business days of the occurrence of the event.   Because of the difference in market cap, shareholder base, revenue and cash flow, the signing of (or loss of ) a Letter of Intent or Purchase Order for $50,000 may not be material for Google, but it may be radically good (or bad) news for a newly reporting Issuer still in the development stage with few assets and no revenue.

This kind of thinking (that there is no such thing as “TMI”) prevents many problems.  When small public companies take the time to think hard about whether the news being distributed can be easily and well documented, that moment of pause can save many headaches later.