The great leveler: 20 years of Regulation FD
If you’ve picked up an issue of IR Magazine or been to an investor relations conference during the last three years, you’ll be aware of the time spent discussing Mifid II. As a profession, we’ve spent countless hours and column inches discussing the lasting effects of the EU’s regulation on corporate access, sell-side compensation and targeting. But Mifid II had a predecessor and this year marks the 20th anniversary of Regulation Fair Disclosure, the US ruling that fundamentally changed banking research, issuers’ disclosures and the nature of investor meetings.
Reg FD enshrined the principle that all investors or potential investors should have access to the same information at the same time. In doing so, it closed back channels and altered cozy relationships that previously existed between banks, executives and investors. It created the template for the investor meetings that are organized today and appointed IR professionals as the internal enforcers of staying onside – only disclosing publicly available information. By this time, investor relations had emerged as a distinct entity, separate from financial communications. But Reg FD suddenly placed IR professionals in the same room as their CEO, CFO and extended management team, outlining what’s been disclosed and how it can be discussed at events and meetings.
Democratizing the flow of information
Reg FD democratized the flow of information, according to Mark Aaron, former vice president of investor relations at Tiffany & Co. ‘Reg FD leveled the playing field: communication had to adhere to certain standards and guidelines of what the company had already disclosed,’ he explains.
Aaron says there was a lot of consternation among IR professionals when the regulation was first implemented because they worried that they could never again sit down with investors and share information with them. The legal departments of companies were up in arms and causing IR professionals further headaches because of their worries over what could and could not be disclosed under the new rules.
Many IR professionals thought they could no longer tell investors anything of substance, which Aaron dismisses. ‘I would talk to lots of people about a lot of meaningful things at Tiffany, but it was already disclosed,’ he says. ‘I could deviate from the standard talking points, as long as I wasn’t disclosing anything non-public and material. I wasn’t going to tell anybody anything that other people didn’t know.’