Johnik defines & discusses "material" information for public companies and Regulation D

Regulation FD and the Form 8-K filed in accordance therewith. I see that there has been a lot of chatter about these two requirements. At the end of this post is a link to the text of Regulation FD, as it currently appears on the SEC's website, for you to read at your leisure.

In general terms, Regulation FD requires the corporation (more precisely, the "issuer" as defined in the regs) to make public disclosure of "material nonpublic information" in the event that it discloses such information to specified persons (most notably, a "holder of the company's securities, under circumstances in which it is reasonably foreseeable that the person will purchase or sell the issuer's securities on the basis of the information").

The question you raised is a good one: When is information deemed "material" under this rule? Given that a violation of Regulation FD turns, at least in part, on the meaning of the term "material," it is a fundamental consideration. You will see that Regulation FD itself does not define the term "material."

The most common definition of "material" I have seen states that a fact is material if "there is a substantial likelihood that a reasonable shareholder would consider it important" in making an investment decision, or, stated in different terms, the fact "would have been viewed by the reasonable investor as having significantly altered the 'total mix' of information made available." This oft-quoted language is taken from a 1976 decision of the U.S. Supreme Court (on page 449):

http://scholar.google.com/scholar_case?case=8985475040212340102&q=426+U.S.+438&hl=en&as_sdt=40000002

Even with this definition, there is no definitive guidance as to what information necessary implicates Reg FD; rather, the materiality requirement must be determined in light of the underlying facts and circumstances. The SEC has, however, provided at least some guidance as to what type of information might be considered material, depending on the circumstances. Note that this list is non-exhaustive (found under section II.B.2):

Quote: While it is not possible to create an exhaustive list, the following items are some types of information or events that should be reviewed carefully to determine whether they are material: (1) earnings information; (2) mergers, acquisitions, tender offers, joint ventures, or changes in assets; (3) new products or discoveries, or developments regarding customers or suppliers (e.g., the acquisition or loss of a contract); (4) changes in control or in management; (5) change in auditors or auditor notification that the issuer may no longer rely on an auditor's audit report; (6) events regarding the issuer's securities -- e.g., defaults on senior securities, calls of securities for redemption, repurchase plans, stock splits or changes in dividends, changes to the rights of security holders, public or private sales of additional securities; and (7) bankruptcies or receiverships.

http://www.sec.gov/rules/final/33-7881.htm

Note that the SEC in this release has followed the above-quoted definition of "material" taken from the Supreme Court decision, and has explained that there is no definitive (or "bright-line") test for determining materiality:

Quote: The final regulation, like the proposal, applies to disclosures of "material nonpublic" information about the issuer or its securities. The regulation does not define the terms "material" and "nonpublic," but relies on existing definitions of these terms established in the case law. Information is material if "there is a substantial likelihood that a reasonable shareholder would consider it important" in making an investment decision. To fulfill the materiality requirement, there must be a substantial likelihood that a fact "would have been viewed by the reasonable investor as having significantly altered the 'total mix' of information made available." Information is nonpublic if it has not been disseminated in a manner making it available to investors generally.


. . . While we acknowledged in the Proposing Release that materiality judgments can be difficult, we do not believe an appropriate answer to this difficulty is to set forth a bright-line test, or an exclusive list of "material" items for purposes of Regulation FD.

(same section and link noted above)

Regulation FD: http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=fe408b58c5c209dd7618b3cfad374ab1&rgn=div5&view=text&node=17:3.0.1.1.4&idno=17

I hope this information is helpful.