Public companies that issue earnings guidance operate under three overlapping SEC rules: Regulation Fair Disclosure (Regulation FD), which requires that material forecasts reach all investors at the same time; Regulation G, which governs any non-GAAP numbers inside the forecast; and the safe harbor created by the Private Securities Litigation Reform Act of 1995, which can shield forward-looking projections from liability if specific procedures are followed. Together these rules dictate when guidance can be shared, how it must be presented, what disclaimers must accompany it, and what happens when a company gets it wrong.
Regulation FD: The Simultaneous Disclosure Rule
Regulation FD took effect on October 23, 2000, and its premise is simple. If a company shares material nonpublic information with select outsiders, it has to share the same information with everyone else.1Securities and Exchange Commission. Selective Disclosure and Insider Trading Earnings guidance almost always qualifies as material, because a reasonable investor would consider a forward-looking profit or revenue forecast significant when deciding whether to buy or sell. The Supreme Court frames materiality as a “substantial likelihood” that the fact would meaningfully alter the total mix of information available to investors.2Securities and Exchange Commission. Assessing Materiality: Focusing on the Reasonable Investor When Evaluating Errors
The rule targets disclosures to specific categories of market participants:
- Brokers and dealers, and anyone associated with them
- Investment advisers and institutional investment managers who file Form 13F with the SEC
- Investment companies and their affiliates
- Shareholders, when the company can reasonably expect them to trade on the information
These are the people most likely to act on an early look at a company’s financial forecast.3eCFR. 17 CFR 243.100 – Regulation FD
Intentional vs. Unintentional Disclosure
Timing of the required public disclosure depends on whether the selective tip was deliberate. A disclosure is intentional when the person making it knows, or is reckless in not knowing, that the information is both material and nonpublic. In that case, the public disclosure must be made simultaneously.1Securities and Exchange Commission. Selective Disclosure and Insider Trading
Unintentional disclosures must be corrected promptly. Under the regulation, “promptly” means as soon as reasonably practicable, and no later than 24 hours after a senior official learns of the leak, or the start of the next trading day on the New York Stock Exchange, whichever comes later.4eCFR. 17 CFR 243.101 – Definitions
How the Company Makes Information Public
Regulation FD gives companies two acceptable methods. They can file or furnish a Form 8-K with the SEC, or they can use any other method reasonably designed to reach the broad investing public on a non-exclusive basis, such as a press release through a major news distribution service.1Securities and Exchange Commission. Selective Disclosure and Insider Trading Most companies do both: an 8-K paired with a wire-service release at the same moment the guidance is spoken aloud on the earnings call.
Regulation G: Rules for Non-GAAP Numbers in Guidance
Guidance frequently includes figures like Adjusted EBITDA or free cash flow that are not defined under Generally Accepted Accounting Principles. Regulation G, adopted in 2003 under authority granted by the Sarbanes-Oxley Act of 2002, imposes two requirements whenever a company uses a non-GAAP measure.5Securities and Exchange Commission. Conditions for Use of Non-GAAP Financial Measures The company must present the most directly comparable GAAP measure alongside the non-GAAP number, and it must provide a quantitative reconciliation showing how the two figures connect.6eCFR. 17 CFR Part 244 – Regulation G
For forward-looking non-GAAP measures, the reconciliation must be quantitative to the extent the company can provide it without unreasonable effort.6eCFR. 17 CFR Part 244 – Regulation G This is why earnings releases typically include a table bridging projected Adjusted EBITDA back to GAAP net income, with line items for stock-based compensation, restructuring charges, and other adjustments.
Regulation G also prohibits presenting a non-GAAP measure in a way that, taken together with the accompanying information, is materially misleading. A company cannot label a figure “adjusted earnings” while stripping out recurring expenses that investors would reasonably consider part of normal operations.
When non-GAAP figures are shared orally during an earnings call rather than in a written release, the reconciliation requirement is satisfied by posting the reconciliation on the company’s website at the time of the call and telling listeners where to find it.6eCFR. 17 CFR Part 244 – Regulation G
The PSLRA Safe Harbor for Forward-Looking Statements
Any forecast can turn out to be wrong. The Private Securities Litigation Reform Act of 1995 created a safe harbor so that companies willing to share an outlook are not automatically liable when actual results fall short of projections.
Two Paths to Protection
The safe harbor offers two independent routes. A company is shielded from liability if the forward-looking statement is identified as such and is accompanied by meaningful cautionary language pointing to specific factors that could cause actual results to differ materially. Alternatively, even without cautionary language, the company is protected if the plaintiff cannot prove the statement was made with actual knowledge that it was false or misleading.7Office of the Law Revision Counsel. 15 US Code 78u-5 – Application of Safe Harbor for Forward-Looking Statements
The cautionary statements must be substantive and tied to the company’s actual risks. If guidance depends heavily on the launch of a new product, the cautionary language needs to address product delays, manufacturing problems, and regulatory rejection. Generic disclaimers about “general economic conditions” and “market volatility” do not satisfy the standard on their own.
Oral Statements Face an Extra Step
The safe harbor applies to both written and oral statements, but oral forecasts carry an additional procedural requirement. During an earnings call, the speaker must state that the projection is forward-looking and that actual results could differ materially, then direct listeners to a readily available written document, usually an SEC filing, containing the full cautionary language.7Office of the Law Revision Counsel. 15 US Code 78u-5 – Application of Safe Harbor for Forward-Looking Statements That is the reason earnings calls almost always begin with a scripted disclosure and a reference to the most recent 10-K or 10-Q.
What the Safe Harbor Does Not Cover
The protection has hard limits. It does not apply to financial statements prepared under GAAP, to statements made in connection with a tender offer, or to statements made by investment companies.7Office of the Law Revision Counsel. 15 US Code 78u-5 – Application of Safe Harbor for Forward-Looking Statements And it never covers a statement the speaker knows is false. A CEO who issues confident guidance while sitting on internal projections showing the quarter is collapsing cannot invoke safe harbor protection, no matter how many cautionary statements the press release contains.
Quiet Periods and Revising Guidance
Quiet Periods
Most public companies observe a quiet period in the weeks leading up to an earnings announcement, during which management stops communicating with analysts and investors about financial performance. Quiet periods are not legally mandated for quarterly earnings. They are a voluntary risk-management practice adopted because informal conversations in the final weeks of a quarter create obvious Regulation FD exposure. A casual comment confirming or denying an analyst’s model could amount to selective disclosure of material nonpublic information.
A typical quiet period begins about two to three weeks before quarter-end and runs through the earnings release. Some companies start earlier, and many fix the exact dates in their corporate disclosure policies. During this window, investor relations teams generally decline meeting requests and stop returning analyst calls.
Revising or Withdrawing Guidance
When a company realizes its prior guidance no longer reflects reality, it faces a decision with real legal and reputational consequences. Under federal securities law, companies generally have no affirmative duty to update prior guidance unless they have specifically committed to doing so. But the absence of a legal obligation does not make silence safe. If a company knows it will miss its guidance by a wide margin and keeps making public statements that could be read as affirming the old forecast, those statements can create liability.
Companies that decide to pre-announce revised results typically do so through a press release or Form 8-K, following the same Regulation FD procedures that applied to the original guidance. The revision should come only when management is confident in the new numbers, because correcting a correction destroys credibility with investors and analysts. The decision usually involves the CEO, CFO, chief legal officer, head of investor relations, and key members of the audit committee.
Companies that withdraw guidance entirely, rather than revise it, should include an explicit statement that they are not undertaking any duty to provide future updates. Without that disclaimer, a court may later conclude the company assumed an ongoing obligation to keep the market informed as conditions continued to change.
SEC Enforcement
Regulation FD violations do not carry criminal penalties, but the SEC can bring civil enforcement actions against both companies and the individuals responsible. A Regulation FD violation on its own is not treated as securities fraud under Rule 10b-5, yet it can still result in cease-and-desist orders and civil monetary penalties.
Enforcement actions in this area typically involve executives who selectively tipped analysts or large investors about upcoming results. In 2024, the SEC charged DraftKings with selectively disclosing nonpublic information and imposed a $200,000 civil penalty. The company agreed to cease and desist from future violations and to implement Regulation FD training for employees with corporate communications responsibilities.8Securities and Exchange Commission. SEC Charges DraftKings with Selectively Disclosing Nonpublic Information Penalties can be substantially higher in egregious cases, and individual executives involved in selective disclosures have also faced personal fines.
Enforcement risk extends well beyond formal analyst meetings. An offhand remark at a cocktail party, a private email to a major shareholder, or a social media message to a select group can all trigger Regulation FD obligations if the information shared is material and nonpublic. Companies manage this risk through written disclosure policies, designated spokespersons, quiet periods, and regular training for anyone who interacts with the investment community.