24 December 2017

US Corporate Law News: SEC issues new rule governing disclosure of material news after the closing bell

Yin T. Ho
Senior associate | US

On December 4, 2017, the SEC approved a rule change to the NYSE rules prohibiting a listed company from releasing material news after the closing bell until the earlier of publication of the company's official closing price or five minutes after the official closing time. The rule change is intended to prevent post-closing news from causing significant discrepancies in prices among the NYSE and “away markets” (non-NYSE marketplaces). Specifically, when a listed company releases material news shortly after 4:00 P.M. Eastern Time but before the NYSE conducts the close of trading and determination of official closing price, the material news release can cause the company's stock to trade at materially different prices in away markets where trading activity continues after 4:00 P.M. Eastern Time. As noted by the SEC, because the price discrepancy has the potential to cause market disruption and reduce investor confidence, the rule change is needed to promote just and equitable principles of trade. The sole exception to the rule change is that a listed company is never expected to withhold material news that it inadvertently disclosed selectively if doing so would violate “Regulation FD.” For more information, see: https://www.sec.gov/rules/sro/nyse/2017/34-82213.pdf.

Yin T. Ho Senior associate | San Francisco