Hard time getting in on conference calls? Good article about it.
bloomberg.com
Access Denied
Mon, 20 Dec 1999, 8:24pm EST
SEC's Levitt Seeks to Open Company Conference Calls (Update4)
By Liz Skinner and Neil Roland
SEC's Levitt Seeks to Open Company Conference Calls (Update4)
(Adds details about speech, comment from Coffee)
New York, Oct. 18 (Bloomberg) -- Securities and Exchange
Commission Chairman Arthur Levitt, stepping up his campaign
against selective disclosure, asked companies to let all
investors participate in conference calls about important
information.
''I appeal to companies, in the spirit of fair play: Make
your quarterly conference calls open to everyone, post them on
the Internet, invite the press,'' Levitt said in a speech to the
New York Economic Club.
The point is to give all investors equal access to
potentially market-moving information, Levitt said. The
commission will consider rules in the next few months ''to close
the gap between those in the so-called 'know' and the rest of us
in the public,'' he said.
In another step to improve access to information, Levitt
said the SEC will issue a preliminary proposal to form a central
national stock market that would require electronic links among
competing markets. Such a move would let investors see the best
prices on established markets such as the New York Stock Exchange
as well as electronic trading networks like Reuters Group Plc's
Instinet Corp.
The proposal would build on Levitt's request to firms last
month to consider creating links among markets for so-called
''limit orders,'' or customer orders at specified prices. Many of
these orders go unmatched because, after being placed on one
trading network, they can't be matched with similar orders on a
competing market.
''The only way this will get done is by forcing it, because
you can expect industry foot-dragging,'' Columbia University law
professor John Coffee said.
Some brokerages that internally match limit orders, as well
as NYSE specialists, have expressed concern that Levitt's
proposed market links could eventually jeopardize their business.
'Dysfunctional Relationships'
The SEC chairman also criticized what he called a ''web of
dysfunctional relationships'' among companies, brokerage
analysts, and securities firms that rely on their analysts to
help get underwriting business.
''In many respects, analysts' employers expect them to act
more like promoters and marketers than unbiased and dispassionate
analysts,'' he said.
Levitt, referring to a prominent singer who rarely performs
before audiences, said, ''Is it any wonder that today, a 'sell'
recommendation from an analyst is as common as a Barbra Streisand
concert.''
The SEC chairman urged securities firms to examine their pay
practices for analysts. The New York Stock Exchange and Nasdaq
Stock Market also should consider ways to make sure investors
get more than ''boilerplate disclosure'' or ''small-type
disclaimers'' about relationships between brokerages and the
companies covered by their analysts.
Levitt, in his speech, also said the SEC:
-- Will issue an order in the next few days requiring the
options markets to create electronic links among themselves. Some
of these markets have been resisting his calls for linkages since
early this year;
-- Will vote soon on a proposal to open up trading in many
NYSE-listed stocks to National Association of Securities Dealers
firms, such as Knight/Trimark Group Inc. and Bernard L. Madoff
Investment Securities. These firms must now go through a regional
stock market if they want to trade stocks, such as General
Electric Co. and International Business Machines Corp., that were
listed on the Big Board before 1979.
-- Asked Jeffrey E. Garten, Dean of Yale University's School
of Management, to gather business, academic and accounting
leaders to examine whether the current business-reporting
framework works as the economy has shifted from an industrial
economy to one based on services.
Levitt, in blasting the practice of selective disclosure,
also suggested concern about one of the staples of the initial
public offering process -- the meetings held in several cities
where company officials and their investment bankers deliver a
detailed message to institutional investors.
''We've also all heard about those roadshows where the
banker's analysts give investors a select look at an IPO that's
not available to ordinary investors,'' Levitt said. ''While
roadshows obviously serve a valued purpose, they shouldn't be the
vehicle for giving a very different look at the company that's
not in the prospectus.''
'Disservice to Investors'
Companies ranging from Microsoft Corp. to Wal-Mart Stores
Inc. to Exxon Corp. have failed to invite all shareholders to
participate in telephone conference calls in recent months in
which company officials discussed earnings, investments, and
other matters with analysts and institutional investors.
Abercrombie & Fitch Co. drew criticism last week after
reports that the company told a Lazard Freres & Co. analyst of
sluggish fiscal third-quarter sales five days before the clothing
retailer made the forecast public. That announcement sent shares
tumbling 19 percent on Wednesday.
In June, PacifiCare Health Systems Inc. shares fell 14
percent after the No. 1 operator of Medicare health-maintenance
organizations told selected analysts that second-quarter earnings
would fall short of forecasts. A PacifiCare spokesman has said
the company stands by its action.
SEC staff will recommend a rule that requires a company
to tell the public before, or at the same time, that it notifies
analysts and institutional investors of information likely to
affect its stock price. SEC commissioners then will decide
whether to issue the proposal for public comment. After the
comment period, the commissioners will decide whether to give
final approval to the rule.
Company officials have said there are practical reasons to
be considered, including the technical difficulties of inviting
an unlimited number of people on a conference call.
Louis Thompson, head of the National Investor-Relations
Institute, which represents corporate investor-relations
executives, said some changes may be necessary, though the
problem shouldn't be blown out of proportion.
''Our capital markets are working pretty darn well,''
Thompson said. ''The rules need some tweaking, but I think the
self-regulatory organizations should put out more guidance on
what companies have to do when they give guidance to analysts.''
Some companies already have changed their disclosure
procedures, including Amazon.com Inc. and Iomega Corp., two
companies that broadcast calls over the Internet.
ConAgra Inc., the second-largest U.S. food company, has let
all shareholders listen to executives discussing its financial
results, after it was criticized for a March call that included
analysts and portfolio managers. ConAgra shares fell 9 percent
that day.
|
