Discomfort Over Disclosure.

• Author: Marshall, Jeffrey
• Position: Brief Article

If the Securities and Exchange Commission wanted to shake things up a bit, it has certainly succeeded. The new Regulation FD (for Full Disclosure) hit the corporate world and the investment community with a wallop in August, and financial executives and analysts everywhere have been scrambling to interpret it and figure out appropriate behavior.

Fundamentally, the ruling is a big blow to leading analysts and investors who have frequently had superior access to companies -- calling them up and picking executives' brains, or sitting in on briefings with only a handful of others. Arthur Levitt's SEC decided that this exclusivity may give those investors an unfair advantage, and set up penalties for companies intentionally providing "material information" on a selective basis before releasing it publicly. The rule was due to take effect Oct. 23.

Analysts and investors let off a howl. The Association for Investment Management and Research (AIMR), a Charlottesville, Va.-based trade group, expressed "extreme disappointment" at the ruling. While it was well-intentioned, the group said, the new rule "will have the opposite effect of what it was intended to do... Corporations will reduce their communications to 'sound bites' and 'boilerplate'...