separate role of reg FD
Reg FD and the strictures against trading on inside information are not one and the same. They both address inside information, that is, material, nonpublic information. But they address different things. In simplistic terms, the rules against trading on such information address the exploitation of leaks and reg FD addresses leaking, itself.
With respect to private placements, my non-expert understanding is that under reg FD a company may selectively disclosure material, nonpublic information to people like the accredited investors in a prospective private placement as long as the recipients of the information explicitly agree to hold it as confidential. The recipients do not have to promise not to trade on it; that is not reg FD's focus. They just have to acknowledge that they are receiving the information in confidence.
My amateur guess is that this requirement that the recipients of such information acknowledge its special character presumably lays the predicate for the separate focus of the rules against trading on insider information. I don't know whether accredited investors who hold such information in confidence are considered as de facto insiders or, instead, like tippees of insiders -- or what difference it makes, for that matter. I don't know what would permit such accredited investors to trade the underlying stock the way we surmise that Bain did.
So LadyExec’s question is a very good one that TRANCE’s facile reg FD response does nothing to answer. Even accepting that under reg FD it's okay to disseminate roadshow information on selective bases as long as the recipients agree to treat it as confidential, I don't know what permits the people who receive such information for the purpose of a placement of unregistered shares to use that information to trade existing, registered shares in the secondary market. |
