Here's an article you might find interesting. I'm copying it here because to access this URL you have to be registered. Some people might not want to bother to do that.
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Chief of SEC faults firms on forecasts
REUTERS
26-Jan-1997 Sunday
Arthur Levitt
Corporations have failed to provide the public with clearer business
forecasts despite winning protections against being sued if they prove
wrong, according to the nation's top securities regulator.
In the text of a speech prepared for the Securities Regulation Institute
conference held last Wednesday through Friday in Coronado, Securities and
Exchange Commission Chairman Arthur Levitt said the agency has been
examining the content of forward-looking corporate disclosures and has
found the area "ripe for improvement."
He said the agency has seen little improvement in disclosure practices
despite a controversial 1995 provision protecting companies from lawsuits
if their forecasts do not materialize.
"Companies are using even more boilerplate," despite the requirement for
"meaningful" cautionary language, the Levitt text said.
While analysts typically get detailed company forecasts during telephone
conference calls with senior management, Levitt's speech noted that other
investors rely largely on official disclosures required by regulators.
The so-called "safe harbor" protection against investor lawsuits was
supposed to bolster the quality of forecasts. But, in his speech text,
Levitt complained that company lawyers have gotten in the way.
Instead of taking advantage of the "safe harbor" to spell out forecasts
more clearly, companies are using it to list a whole range of possible
factors that might cause actual results to vary from forecasts, according
to Levitt.
"Let me just say that it is not 'meaningful' to provide only a generic
laundry list of possible risks," Levitt said. "Your board (of directors)
wouldn't want a boilerplate list of risks; investors don't want it either."
In the speech, Levitt also advocated providing investors with easy-to-read
information about a company before they commit to buying securities.
He also expressed interest in a proposal that would broaden the field of
"material events" that require disclosure with the SEC.
"It's a safe bet that investors want to know about such events as the
registration or termination of top executives, or default by the company on
its corporate debt," the text said.
Levitt also said he supports shortening the "quiet period" surrounding the
registration of securities to a specified brief time before a filing so
that it "does not chill company communication in the ordinary course of
business."
Levitt set no timetable for any of the changes but listed them among "areas
of improvement in the offering process that are within our grasp today."
Copyright Union-Tribune Publishing Co. |
