Support the SEC - STOP THE WALL STREET FRAUD!
Terry Savage, a syndicated columnist, is the author of The Savage Truth on Money (Wiley, 1999), a personal finance advice book combined with online resources.
MAY 17, 2000
Who's Hurt By More Disclosure? Not Investors
By Terry Savage
The Securities and Exchange Commission's proposed new rule, Regulation FD (full disclosure) would seem to be uncontroversial. The regulation requires public companies to make intentional disclosures available to all simultaneously. If a company official makes unintentional disclosure is made, public disclosure of that same information must be made promptly. Since the SEC does not have direct power over analysts, the burden falls on the public companies the agency regulates.
Individual investors appear delighted that the proposal would make them privy to companies' business or financial disclosures immediately: No longer would favored securities analysts get news or insights in advance of retail traders -- which isn't supposed to happen but, of course, does.
Not surprisingly, in a classic bit of Orwellian logic, the securities industry is loudly complaining that the proposed regulation would actually stifle the distribution of material information. After all, they argue, since a company is held responsible for compliance with the new rules, its managers' obvious reaction would be to simply stop giving any interviews to street analysts or fund managers (not to mention journalists).
This argument overlooks the fact that immediate distribution of financial information to all concerned is now not only possible, but is actually happening every day. Several websites, including www.bestcalls.com, www.vcall.com, www.StreetFusion.com and Yahoo Finance, already provide a free and open source for live conference calls that give the individual investor a chance to participate on an equal footing with the pros.
Most of these webcasts are not only transmitted live, but are available on demand for weeks after the initial broadcast. You can get schedules of upcoming conference calls with analysts, and even be notified by e-mail of upcoming events. Several sites post earnings reports immediately, and some specialize in hosting live events. According to StreetFusion, more than 1,600 companies have made earnings announcements on its online broadcast system this year, up from 200 last year.
Now, financial public relations professionals are using these websites to expand their services to corporate clients. Financial Relations Board/BSMG Worldwide (www.frbinc.com), a leading investor relations firm for startup technology companies, as well as some Old Economy companies, is hosting its Spring Virtual CEO Summit -- a four-day online event starting Monday, May 22nd.
Accessible through several of the Web sites mentioned above, the summit features at least 50 CEOs of companies ranging from Ingersoll-Rand and ServiceMaster to About.com and FTD.Com. All will be making live presentations, and taking questions from the online audience.
With both corporations and investors using technology to get the message out, what's Wall Street whining about? I remember distinctly Wall Street's reaction years ago when insurance analyst Ray Dirks told his best clients to get out of Equity Funding stock, because he suspected their earnings. Only later did he make his findings public in a report. By that time, Dirks's clients had unloaded their positions.
It made sense to me at the time. Dirks was doing his job -- well -- and probably deserved a bonus, instead of the public pillorying he got. (The U.S. Supreme Court backed Dirks in a landmark 1983 decision.)
That debate had real meaning in an era when analytical digging (instead of accepting company press releases) was the only way to get an investment edge. But we've come a long way in the last 20 years. Information is more easily accessible -- and in this new era of communications and the Internet, companies should be required to disclose fully, openly, and to all concerned at the same time.
Some companies are already taking advantage of technology to get ahead of Regulation FD. Finnish wireless provider Nokia uses its corporate website not only to demonstrate its products, but to keep investors fully informed. Corporate presentations and investor relations news is prominently highlighted on this website.
Regulation FD doesn't infringe on the "free speech" rights of either companies or the Street. If investors persist in second guessing the "guidance" of corporate executives, they can still turn to Web sites like www.whispernumbers.com or www.earningswhispers.com.
If analysts want to complain about the quality of earnings based on accounting techniques, they can still make headlines. And if executives either mislead investors or make egregious mistakes (as Proctor and Gamble did earlier this year), investors will punish them even more intensely.
That's what free markets are all about.
Terry Savage, a syndicated columnist, is the author of The Savage Truth on Money (Wiley, 1999), a personal finance advice book combined with online resources.
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Kinda scarry, but the Net investor will make a difference this time... only Wall Street ANAL.ysts, and their trading desks, will screw-up the markets!
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