Somewhat OT but worth the read. Note the SIA whining about the public getting the same knowledge they do. Are the ANALysts afraid they can't compete on a level playing field? They should be!
Schwab Backs SEC Crackdown on Disclosure
By Jeremy Pelofsky
WASHINGTON (Reuters) - Charles Schwab Corp. (NYSE:SCH - news), the No. 1 U.S. discount and Internet brokerage firm, has endorsed a proposal by securities regulators to crack down on companies disclosing sensitive market data to a select few.
The Securities and Exchange Commission proposed rules last December requiring corporations to disclose material information that may influence investment decisions to all investors and analysts at the same time to level the playing field.
``We believe this initiative has the potential to increase investor confidence in the basic fairness of our markets,'' Hardy Callcott, general counsel at Schwab, said in a comment letter sent to the SEC.
``Every time a security's price moves substantially, and only afterwards does the information responsible for that move become public, investors lose confidence in the fundamental fairness of our markets,'' he said.
The agency's proposal also would require that companies which had inadvertently disclosed sensitive information to publicize the information as soon as it realized selective dissemination had been made, a concept Schwab urged the SEC to adjust slightly.
The comment period for the SEC proposal ends on Friday and the agency has received approximately 3,000 comment letters, largely from individual investors supporting the proposal.
Clothier Abercrombie & Fitch Co. (NYSE:ANF - news) came under fire last fall when investors learned through published reports that a company official allegedly told an analyst that third quarter sales at the retailer would be disappointing, about a week before the news was revealed to the public.
That early information led to a sell-off in the company's stock and prompted the securities regulator to open a formal investigation into the matter.
Yet the SEC selective disclosure plan has met stiff resistance from some quarters of the securities industry and corporations because of fears that all discussions with analysts and others, such as suppliers to the companies, could be construed as material and thus would require disclosure.
Schwab encouraged the SEC to clarify the accidental disclosure part of the initiative to ensure that good faith, but mistaken judgement, about the materiality of information be considered inadvertent disclosure and protected from liability.
``We believe the Commission's intent was not to impose liability for honest but mistaken subjective judgements; rather its intent was to deter the intentional selective disclosure of news a company knows is material to the market,'' Callcott said.
The Securities Industry Association, which represents about 740 securities firms, said it had heard from many firms that they would cut off the flow of information for fear of being sued.
``We believe that the majority of issuers will curtail the current level of communications with securities analysts and the media,'' Lee Spencer, the chairman of the SIA's ad hoc working group on the SEC's disclosure proposal, said in a comment letter.
One securities lawyer said that the proposal by the regulator has prompted many companies to expand the dialogue with individual investors and the media.
``A lot of what the SEC has been trying to accomplish, has been accomplished. Analyst conference calls have been opened up not just to analysts and institutional investors but to individual investors and the media,'' said Daniel Kramer, a lawyer in the New York firm of Schulte Roth & Zabel LLP.
While the SEC rules do not specifically call for companies to open up their conference calls with analysts to the public, any material information disseminated during those calls would likely have to be disclosed in some fashion under the new rules.
Companies like SBC Communications Inc. (NYSE:SBC - news), US Airways Group Inc. (NYSE:U - news) and Bristol-Myers Squibb Co. (NYSE:BMY - news) have not in the past allowed the public to listen in to their calls while AT&T Corp. (NYSE:T - news), Corning Inc. (NYSE:GLW - news) and Qwest Communications International Inc. (NYSE:Q - news) do allow the media to tune in.
``There are areas where the (selective disclosure) proposals could be clarified and narrowed to provide some relief to companies, but it may be that those clarifications do not go far enough to satisfy,'' Kramer said.
With the close of the comment period on Friday, the SEC staff will evaluate the comments received and craft any changes before making a formal proposal for adoption by the full commission.
``We are not suggesting that selective disclosure does not happen. But, we do question whether the magnitude of these occurrences justifies rule making by the SEC,'' said Louis Thompson, president and chief executive officer of the National Investor Relations Institute in a comment letter to the agency. |
