Do you remember the days when companies held exclusive conference calls with Wall Street analysts? Remember the times when you, the individual investor, were the last one to hear about that new product, that earnings warning, that management change? Wall Street professional firms had a substantial information advantage, with their analysts often working alongside public companies to capitalize on and then deliver important financial news to the marketplace.
While those days are gone, there's no guarantee they can't return. Last year, the Securities and Exchange Commission (SEC) implemented Regulation FD, a rule designed to prohibit selective, private disclosure of relevant information by publicly traded companies. Selective disclosure happens when companies release material information -- important stuff like future earnings and revenue projections -- to analysts at large brokerage houses and mutual fund managers, before releasing it to the general public. The SEC ruled last year that selective disclosure violated the spirit of our public markets.
However, no principle is ever set in stone. Regulation FD (for "Fair Disclosure") was passed over the strenuous objections of many influential players in the financial services industry. One factor behind its eventual passage was the overwhelming support of individual investors. Literally thousands of investors -- thousands of you -- sent notes to the SEC, many through The Motley Fool forum. It was the largest response the SEC had ever gotten on one of its initiatives.
But while the rule's been hailed as a huge victory for individual investors, there have also been claims that Regulation FD has played a part in increased market volatility, stifled corporate disclosure, eroded the relationships between public companies and their financiers, and generally contributed to the market's recent downturn.
Tom Gardner to participate in SEC panel
On April 24th, the SEC is holding a public roundtable to discuss how Regulation FD has affected financial markets, analysts, and investors. Fool co-founder Tom Gardner has been asked to participate. Tom would like to hear your thoughts on Regulation FD on our Talk to the SEC message board. Does Regulation FD matter to you? If it were to be repealed, would you care? Please share your thoughts by posting to the board. And please note if you're comfortable with our sharing those thoughts at the conference.
Specifically, the topics under discussion will be:
How do investors view the quality and quantity of information being disclosed? Are investors getting more timely information? Are investors getting high quality information under FD? Is there a danger of information overload? Can investors understand what they are getting?
Methods of disclosure -- is reliance on new technologies appropriate? Is there a risk of a "digital divide"? (For example, full disclosure frequently occurs through webcasts and other media that not all investors can access.
- Are investors concerned about the issues that concern the analyst community? What are investors' views on the role of analysts in the market?
Perhaps you, as an investor, don't understand the information you're getting, but if you do, then the SEC should probably know about it. And we're sure that many of you have opinions on the role of analysts in the market.
Any and all thoughts you have would be appreciated. Go ahead and post them!
In addition to the posts on the Talk to the SEC board, take a look at some of the stuff we've written about Regulation FD, but don't let our views influence yours... make your own decision, and let us know what you'd like the SEC to hear.
SEC Levels Playing Field -- Our take on Regulation FD when it was initially proposed.
Wall Street Opposes Level Playing Field -- Find out who opposed Regulation FD and why.
The Myth of Analysts' Best Practices -- Take a look at Merrill Lynch's response to Regulation FD.
Important SEC Vote on Thursday -- A good summary of the opposition to Regulation FD and how important the rule is to individual investors.
SEC Chairman Stands Behind Full Disclosure -- An interview with former SEC Chairman Arthur Levitt about Regulation FD.
Don't Let Fair Disclosure Get Politicized -- After Chairman Levitt's resignation, we reminded people that Regulation FD was not a political issue, but an investor issue.
Raytheon: Fair Disclosure Test Case? -- How Raytheon and some other companies responded to Regulation FD.