Quiet Periods

21 July 2010

I recently completed a mini research project for a client on quiet periods. This forward thinking client wanted to ensure that their quiet period policy was in line with what other companies were doing and what the regulators were suggesting.

The findings were predictable. Most companies have a quiet period that starts around the end of the quarter and stops when results are released to the public. That makes sense.

The vast majority of companies still authorize discussions between management and the Street during quiet period while “being careful not to disclose information about the pending quarter”.

Only one company actually didn’t allow their management team to speak with the Street during their quiet period. Does that surprise you? It really surprised me.

Quiet periods exist so companies and management teams do not expose themselves to possible selective disclosure between the end of a quarter and when results are announced. Translation: quiet periods exist to protect management from saying something that they shouldn’t be saying yet.

The problem is members of management are human beings. Human beings make mistakes (sometimes big ones, sometimes small ones). When we allow our management to speak (even carefully) during a quiet period we are exposing them to significant risk.

Are your quiet period policies and practices really protecting your company and your management team?

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