Full Dissemination of Information–How Many Days?

How many days does it take for material nonpublic information in a press release or an SEC filing to be deemed fully disseminated to, and digested by, the marketplace? The answer can affect, for example, the duration of a company’s standard trading blackout period or the timing of a company’s capital markets transactions. While the answer used to be fairly clear cut, in these days of near-instantaneous electronic communication it is decidedly less so.

What do most companies do?

A recent report by the National Investor Relations Institute provides a helpful frame of reference. In its Trading Blackouts and Quiet Periods Survey—2015 Report, the NIRI states that 51% of respondent companies have a trading blackout period ending two business days after earnings are announced. The remaining 49% is split between companies that end their trading blackout period either one business day after earnings are announced or on the same day and companies that end their blackout periods more than two business days after earnings are announced. The report suggests a slight trend toward shorter dissemination periods over the past few years, no doubt due to the growing emphasis on real time communication at all levels of society.

Should you adopt the one-business-day model?

Everyone wants to be back in the market as soon as possible following the disclosure of material nonpublic information. And admittedly, two business days can feel like a long time to wait when it seems like every news organization in existence has picked up the new information in a matter of minutes.

The answer, as with most things disclosure-related, is a judgment call. In this case, it depends on how widely your company is followed in the marketplace and how extensively the information is routinely distributed. For example, a high-profile, large-cap, large accelerated filer/WKSI with high daily trading volume and frequent securities issuances is presumably closely watched by many analysts and the media. Such a company might reasonably switch to one business day. As a company’s profile moves away from that standard, one business day becomes harder to support.

Although the day may come (and may come soon) when one business day is accepted practice across all categories of companies, we are not there yet. Two business days remains the norm.