Selective disclosure involves a company' s release of material information to an individual or group prior to its broad public dissemination. If by chance such disclosure occurs, a company should immediately issue a press release detailing the news. Or it should halt trading in its stock until such a press release can be issued. Rational Software's failure to take immediate corrective action confirmed and compounded the company's failure to abide by ethical disclosure practices. Companies are obligated to disclose within 15 days certain major events such as a change in top management.
Companies have more leeway in releasing other types of material information.
A corporation is only required to make prompt disclosure of such news when there's reason to believe insiders are trading on it or leaking it, or when new facts come to light that make a previous disclosure false or misleading. When information is made public is certainly important. Plaintiffs' attorneys often argue that a company's top management profited while deceiving shareowners about a company's real prospects. Occasionally the attorneys are right. Yet what really concerns us here is how a company disseminates information when it decides to disclose it.