Are you saying that Enron.... violated a SEC rule?
Brian,
These are somewhat complicated matters and I am not a judge.
The rule prohibiting selective disclosure of material facts has traditionally been interpreted to allow the salient features to be released in a contemporaneous dissemination by news wire or some such broadcast. There has also traditionally been some judicial deference paid to information channelling and filtering: Management speaks to the press and analysts, who then edit and channel the information to the public. Usually, as long as the press was included, that fulfilled the most minimal requirements of a release, so that the informant would not be made a de facto insider on hearing the information, and be then subject to the inconvenient "disclose or abstain from trading" rule. [Remember Ray Dirks?]
The appearance of new technologies such as the World Wide Web, in my opinion, changes the landscape a bit from the days of the Western Union man and the Broad Tape. We now have the means of inexpensively webcasting to the entire world. Many companies do it as a routine matter. These are "technologies of freedom" as the late Professor Ithiel de Sola Pool of MIT referred to them, with a profoundly democratizing potential for society.
If I am a market participant, why should I be satisfied to hear a highly edited or filtered excerpt, when I know that
others, who may seek to trade with me, have heard before me the unabridged version, with every confident or quivering syllable, pause and nuance.
Unless the 25% rise in Enron stock today can be attributed to the appearance of snowfall on Wall Street, a seemingly rare event these days, with its consequent effect on the spirits of natural gas traders, one would have to conclude, in retrospect, that some analysts in Houston were given some highly material information concerning Enron's broadband strategy.
There is no affirmative duty to disclose such information, even if it is material. But if you do so, to be on the safe side, it is best to tell the whole world.**
The cheapest and most efficient means of doing so today, without question, is by webcasting.
Courts and the SEC have been understandably reluctant to enforce the rule because of public policy reasons that "some disclosure is better than none". Now that we have the Web, however, we need no longer make such a Faustian bargain.
Furthermore, it is in the self-interest of the corporation to fully comply with the intent of our disclosure laws. There is just no longer any excuse for a "closed" conference when material information may be disclosed.
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** Otherwise, everyone who hears the information becomes a "tipee", and violates the law if he trades before there is a "release" with full disclosure of the news to all market participants. |
