Compliant Communications for Public Companies: Reg FD and Forward-Looking Statements

Exactly 225 securities class action lawsuits were filed against publicly-traded companies in 2024, according to a report by Cornerstone Research and Stanford Law School. In each case plaintiffs found enough legal grounds to take a company to court for faulty guidance or misleading statements of some sort—potentially taking years to reach a settlement which averages at $42 million.

The idea of exposing themselves to such risk every time they communicate material information—the kind that affects investor decisions—leads many public companies to miss out on valuable publicity simply because they would rather avoid the minefield altogether.

In reality, fruitful stakeholder communication as a public company is simply a matter of implementing the right procedures. Each regulation and obligation can be synthesized into a practical, bespoke, and comprehensive rulebook that lends confidence at every point of communication. 

This post explores the two most important compliance principles—Regulation FD and forward-looking statements—and demonstrates how to apply them effectively.

Principle 1: Communicate Information Simultaneously

Regulation FD (Fair Disclosure), as stipulated in the CFR Title 17 pt. 243, prevents public companies from disclosing nonpublic material information to select analysts, investors, or journalists without disclosing the same information to the public as a whole. The intent of the regulation is to avoid a market where investors do not have equal access to information. To avoid infringement, any communication must be accompanied simultaneously by a public disclosure, if intentional, or by the next day, if unintentional.

Without a coordinated communications strategy, this is an enormous liability risk. Any point of contact across the entire company could suddenly present a legal ultimatum if someone has spoken out of turn. Alternatively, a public company can build provisions for Regulation FD into their basic communication strategy and train spokespeople to follow a simple checklist. For instance:

1. Compile all material information disclosed to the public via wire service or From 8-K into a centralized database. If information is scheduled to be released in the future, the embargoed information and date of release should also be compiled in this database.

2. Always distribute material information—embargoed or not—via established wire services. Be very explicit when communicating an embargo to the press, and release all material information via Form 8-K at the same time that the information is published.

3. Before disclosing any material information to select analysts, investors, or journalists, consult the centralized database to ensure the information is already public or is being released simultaneously.

4. Record all communications with select analysts, investors, and journalists in a separate centralized database.

5. Monitor for data leaks or discrepancies between the databases. Promptly release any leaked information to the SEC via Form 8-K.

By simply making these five requirements standard for every point of communication, a company can all but eliminate the risk of accidental violation. Note that embargoed communications only comply with Regulation FD if they are loaded onto an established newswire where any credentialed journalist can access it; directly emailing non-public material information—embargoed or not—to a select list of journalists is considered a violation.

The checklist should, of course, be adapted to the unique circumstances of the company and subjected to professional legal counsel, while all spokespeople should be thoroughly educated on what does or does not constitute material information.

Principle 2: Disclaim Forward-Looking Statements

While Regulation FD is primarily intended to protect investors from an unfair market, the Private Securities Litigation Reform Act of 1995 (PSLRA) section 102 is intended to protect companies from undue litigation. PSLRA makes provision for forward-looking statements—projections, goals, or assumptions about the future—that may prove untrue due to the inherent uncertainties of business. To be protected, however, a forward-looking statement must meet three basic qualifications. It must:

1. Be clearly identified as a forward-looking statement via wording like “we expect” or “we believe.” 

2. Be accompanied by cautionary statements that express relevant uncertainties and risks.

3. Not be known to the company as false or misleading at the time of release.

If any forward-looking statement is made without meeting these requirements, the company becomes exposed to lawsuits from stakeholders with legal grounds for claiming that they were misled.

The solution is, once again, to formulate a set of procedures robust enough to cover the full scope of the regulation and pragmatic enough to be easily and universally adopted throughout the organization. Companies should begin by crafting a standard disclaimer which can be appended to every press release by default. A generic disclaimer might read: 

This release contains forward-looking statements subject to risks and uncertainties. Actual results may differ materially from those projected.

The company should adapt the statement to reflect the specific risks and uncertainties that accompany its industry, and submit the finished product for review by legal counsel. They should then implement a mandatory review of forward-looking statements for all press releases to ensure each one is clearly identified, and to omit the disclaimer only when no such statements are present.

The Takeaway

Public companies have a unique responsibility to communicate material information with discipline and care. While this burden represents substantial risk, it can also provide the structure a company needs to protect themselves and their stakeholders—assuming they know how to put compliance principles into practice. 

Simultaneous communication and forward-looking statements are two such principles. By adopting and adapting the procedures outlined above, any company will find itself better equipped to address its stakeholders with confidence.

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Be sure to check out our other blogs on useful and interesting public relations topics, like how to create a balanced media scorecard.

The contents of this blog do not constitute legal advice, and are intended for informational purposes only.