Abstract
I present evidence that market participants use Reg FD filings to learn about and price protect against firms' material selective private disclosure ("SPD") activity. Using an expectation of SPD activity based on observable firm events associated with informed trading, I document that market participants price protect whenever Reg FD filings deviate (positively or negatively) from that expectation. Intuitively, market participants price protect more when Reg FD filings exceed their expectations, consistent with higher-than-expected Reg FD filings being interpreted as an indication of higher-than-expected SPD activity. However, market participants also price protect more when Reg FD filings fall short of their expectations, suggesting that market participants do not interpret lower-than-expected Reg FD filings as a signal of lower-than-expected SPD activity, but rather as an indication that the firm has not transparently disclosed that activity. Collectively, my analyses suggest that, although imperfect Reg FD disclosure fails to curtail SPD ex-ante, it does provide useful information against market participants' expected benchmarks ex-post.