Final answer:
The SEC's Regulation FD (Fair Disclosure) requires public companies to disclose material information to all investors simultaneously to prevent insider trading. It ensures fairness in the financial markets by preventing selected individuals from getting an advantage through early access to important corporate information.
Step-by-step explanation:
In order to avoid insider trading, the Securities and Exchange Commission (SEC) has adopted a new rule known as Regulation FD (Fair Disclosure). This regulation mandates that all publicly traded companies must disclose material information to all investors at the same time, ensuring a level playing field and preventing a select few from having an unfair advantage. Regulation FD applies to information that might influence an investor's decision to buy or sell securities and includes measures to prevent selective disclosure to analysts, institutional investors, and other market professionals before the general public.
Regulation FD was part of a broader move towards transparency and fairness in the financial markets. This rule aligns with the principles seen in other financial regulations and policies, such as the Federal Deposit Insurance Corporation (FDIC) that guarantees bank deposits and shines a light on the importance of regulatory agencies like the SEC and the FCC in maintaining market integrity and protecting investors from malpractices.