SFLK can only put out worthless press releases like todays news. Why don't they fess up and tell us all what is going on with the SEC inquiry. Where did Silicon Valley New Issues inc. get those 633,000 shares of stock from after the 504 offering? Did the SEC raid International Buying Powers Office or not? When will the press release increasing earnings and sales projections be released? Will they become a example for things too come?
U.S. SEC May Propose Rule to Bar Corporate Selective Disclosure
Washington, March 16 (Bloomberg) -- The U.S. Securities and Exchange Commission may bar companies from disclosing market- moving information to securities analysts before they release it to the general public, SEC officials said.
''Our goal is to figure out a way to level the playing field,'' SEC corporation finance director Brian Lane said in an interview. To do that, the SEC staff may recommend a new selective-disclosure rule or guidelines to the agency's commissioners following a broader review of insider-trading regulations, he said.
The staff review, which is likely to take several months, ratchets up SEC Chairman Arthur Levitt's effort to coax businesses to voluntarily stop selective discussions with analysts and institutional investors that can move stock prices before other investors get the same information.
In January, for example, General Motors Corp. shares rose 3.2 percent after the world's biggest automaker told an invitation-only meeting of analysts about plans to raise production of profitable pickups and sport-utility vehicles. Last month, Lehman Brothers Holdings Inc. shares rose 6.8 percent after Chairman Richard Fuld told a lunch meeting with analysts and investors that first-quarter earnings may rise.
Levitt has called selective disclosure ''a stain upon our market.'' And billionaire investor Warren Buffett, in his annual letter to Berkshire Hathaway Inc. shareholders Saturday, criticized companies that ''matter-of-factly favor Wall Street analysts and institutional investors in a variety of ways that often skirt or cross the line of unfairness.''
Small Investors
Some SEC division directors and Commissioner Isaac Hunt said a new selective-disclosure standard would benefit small investors. ''I am hopeful that we will be able to find a legal way to stop these practices,'' Hunt said in a Feb. 26 speech.
The SEC staff is considering one proposal that would prohibit companies from disclosing information to select groups before or at the same time that they issue a press release, said SEC general counsel Harvey Goldschmid, who is heading the review. Another would create guidelines on how long corporate insiders must wait after a public announcement before they can begin trading, he said.
''It's clear insiders are required to wait until investors have digested the information before they can start to trade,'' Goldschmid said.
The SEC study is being conducted by the commission's enforcement, corporation finance, and general counsel staffs, which are giving the issue priority because of Levitt's interest in the subject.
'Clear Up' Uncertainty
Any recommendations emerging from the review would have to be crafted into a rule proposal for consideration by the commission. If Levitt, Hunt and other commissioners vote to issue such a proposal, they would take public comments on the issue for a period before deciding whether to give final approval.
''The SEC effort is overdue,'' said Louis M. Thompson, chief executive of the National Investor Relations Institute, which represents corporate investor-relations officers. ''Some people don't know what standards are operative.''
The SEC's enforcement director, Richard Walker, said one benefit of a new rule ''would be to clear up the uncertainty among many companies and analysts about what practices to follow.''
Lehman spokesman William Ahearn said analysts at a February luncheon weren't told anything that wasn't available to others. Fuld's comments -- that first-quarter earnings may surpass those of the same period a year ago -- came in response to an analyst's question, he said. ''Any investor who would have asked the same question of investor-relations would have gotten the same kind of guidance,'' Ahearn said.
General Motors spokesman Mark Tanner declined to comment specifically on the January session with analysts, where GM said increased production of pickups and sport-utility vehicles could add $400 million to this year's profit. Instead, he said the company ''has a keen interest in preventing selective disclosure, and we don't use meetings with analysts for such a purpose.''
Some Shareholders Excluded
Toys ''R'' Us Inc., H.J. Heinz Co., TJX Cos., Federated Department Stores Inc. and Dayton Hudson Corp., among other companies, have recently excluded some shareholders from conference calls or meetings about earnings or other corporate developments.
The selective-disclosure issue caught Levitt's attention last year after some companies discussed financial topics on analyst conference calls, and then waited hours before making a public announcement. During the interim, some companies' stock moved as much as 25 percent.
Levitt's February 1998 speech launched the SEC initiative. ''We hope that self-restraint will solve the problem -- before we have to step in,'' the SEC chairman said.
Levitt used more stinging words in a November interview, saying selective disclosure amounts to ''cheating'' and harms the integrity of U.S. markets. He also urged companies to include reporters in their analyst calls.
Staff Study
The SEC staff's study of new selective-disclosure rules began around Jan. 1, Goldschmid said.
One inside-trading expert expressed concern that any potential SEC rule could soon be overtaken by technological change. A rule written on the basis of current Internet use could become obsolete as more people get easy access to Web sites that could be used to disseminate company information, according to Washington securities lawyer John Olson.
''It's possible there aren't enough Internet users today for a company to post earnings and have that considered public dissemination,'' said Olson, a partner with the Gibson, Dunn & Crutcher law firm. In a couple of years, though, ''virtually everyone may have Internet access, with a bell ringing to signal a corporate announcement,'' Olson said.
The SEC has brought few enforcement cases since a 1983 Supreme Court decision limited culpability to executives who personally benefit from selective disclosures. Two cases stand out -- one in 1991 against former Ultrasystems Inc. chief executive Phillip Stevens, the other in 1996 against Fox-Pitt, Kelton Inc., a brokerage.
Stevens agreed to pay $126,000 to settle charges he enhanced his reputation by passing on unfavorable company financial results to analysts, who then relayed the news to clients. These customers then sold Ultrasystems stock, the SEC alleged.
Enforcement Cases
Fox-Pitt agreed to pay $50,000 to settle charges that several of its New York employees traded on the basis of information obtained during a company conference call with analysts from several brokerages. In their settlements, Stevens and Fox-Pitt neither admitted nor denied the allegations.
The SEC's rule review seeks to supplement the agency's narrower attempt to deal with selective releases of information by public companies before stock offerings. That effort -- part of a broad proposal to revamp SEC securities registration procedures, known as the ''aircraft carrier'' plan -- would let companies freely market their securities to all customers. The companies would have to file marketing materials with the SEC to make them available to all investors.
Those proposals ''should begin to level the playing field,'' said Hunt, the SEC commissioner, who eventually will have to vote on the plan.
Currently, many companies use private promotion tours, often called ''roadshows,'' to give oral briefings on their initial public offerings and secondary stock sales to analysts and institutional investors. Other investors must rely on a written prospectus.
13:27:50 03/16/1999 |
