Selective disclosure is a situation when a publicly traded company discloses material information to a single person, or a limited group of people or investors, as opposed to disclosing the information to all investors at the same time.

Material information Material is a substance or mixture of substances that constitutes an object. Materials can be pure or impure, living or non-living matter. Materials can be classified on the basis of their physical and chemical properties, or on their geologica ...

is roughly defined as information that would cause a reasonable investor to make a buy or sell decision. A problem with selective disclosure that the

U.S. Securities and Exchange Commission The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929. The primary purpose of the SEC is to enforce the law against market ...

(SEC) sought to eliminate with

Regulation Fair Disclosure Regulation FD (Fair Disclosure),
Retrieved January 25, 2011. ordinarily referred to as Regula ...

(a.k.a.

Regulation FD Regulation FD (Fair Disclosure),
Retrieved January 25, 2011. ordinarily referred to as Regula ...

Reg FD Regulation FD (Fair Disclosure),
Retrieved January 25, 2011. ordinarily referred to as Regula ...

), is that it creates an uneven playing field for investors, allowing some investors to profit from material

market moving information Market moving information is a term used in stock market investing, defined as information that would cause any reasonable investor to make a buy or sell decision. It is also sometimes referred to as material information. When a public company ...

before others. An example of a selective disclosure could go as follows: A company insider tells a small group of Wall Street analysts that the company is going to beat current analyst consensus estimates for earnings per share. If this is the first time the company disclosed such

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, and the guidance wasn't simultaneously disseminated to all investors via a press release or publicized webcast, then the disclosure would constitute selective disclosure.

See also