Push Is on for Full Disclosure
By Mitchell S. Ostwald
A push for public disclosure on corporate information got an improbable boost from an unlikely combination of factors.
Arthur Levitt, the Securities and Exchange Commission Chairman, who has expressed interest in running for elective office after he leaves the SEC, has been proactive in the development of online investing and the internet. In furtherance of those goals and objectives, he has mandated disclosure on issues ranging from the history of brokers and the disclosure of disciplinary actions to public filings over the internet. This means that a request for public comments on regulatory proposals put forth by a government agency is now posted over the internet. In most instances, the commentary is quite dry with an occasional response from an interested industry group. However, this most recent request received more than 300 separate responses to the SEC in less than five days.
The 300+ electronically received comments addressed a proposal to stop the practice of "selective disclosure" on material corporate information. The proposed regulation called FD (fair disclosure) is the latest attempt by the SEC to stop companies from providing important information to select audiences (usually Wall Street analysts and large institutional investors) before or instead of telling the broader investment community.
The SEC posted on its website the 300+ responses it received. They range from industry bashing responses to common sense approaches like "please implement these new rules at the end of the 90 day (comment) period so that ALL investors get to see the same cards at the same time before making their play. It's only fair. " The securities industry has through March 29, 2000 to make its comments.
When the SEC first proposed the regulations, the Securities Industry Association said it supported the goal of promoting full disclosure of financial news from public companies, but that it had serious concerns that the specific proposal from the SEC might have a "chilling effect" on companies and their analyst in their ability to disseminate information.
In an era of immediate information via the internet, it's curious what the SIA feels would be the chilling effect of providing equal access to all investors the information they now provide to their large institutional investors. Maybe it's their way of telling investors that they don't want them to be so hard on themselves when some new information comes out that they weren't told about, which caused the securities to drop in value and the investors to lose money. You wouldn't feel so bad since you didn't have access to the information in the first place. The chilling effect most investors would argue is that the current rules allow selective disclosure.
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