NEW YORK (CNNfn) - Individual investors won the right to access corporate financial information at the same time as Wall Street analysts under a new rule adopted by the U.S. Securities and Exchange Commission Thursday.
The rule, Regulation FD, requires companies to disclose profit warnings, earnings reports and any other information it issues to analysts simultaneously to the public via press releases or other notifications, the SEC said..
"High quality and timely information is the lifeblood of strong, vibrant markets. It is at the very core of investor confidence," SEC Chairman Arthur Levitt said. "But when that information travels only to a privileged few, when that information is used to profit at the expense of the investing public, when that information comes by way of favored access rather than by acumen, insight or diligence, we must ask, 'whose interest is really being served?'"
Although the SEC acknowledged the important role analysts play in interpreting financial data, the commission said every investor should have access to the same information at the same time in order to maintain confidence in the markets.
Releasing information only to analysts, Levitt said, has created an atmosphere in which corporate management treats that information as a commodity - "a way to gain and maintain favor with particular analysts."
"That also has put pressure on analysts to report favorably on a company in order to maintain access to inside information," Levitt added.
Many companies already offer such information through live conference calls and Internet Webcasts on earnings and other subjects
So we now will have a more level playing field, although perhaps with fewer players on it (to steal someone's characterization).
Realistically, this will mean less information overall, but less chance of individual investors being the last to know. No more breakout sessions ...
More lawsuits too, alas, and more work for lawyers (material or not material?).
Which reminds me of the joke about the security lawyer that ended up doing hard labor in jail. The guard instructs him to divide a pile of rocks up into big ones and small ones and is dismayed to come back a few hours later to find two small piles and one large pile. The explanation: "Well the two little piles over there are the big rocks and the small rocks, and this big pile over here are the rocks I couldn't decide about..."
Peter |
