SEC Considers New Disclosure Rule
Neil Roland Bloomberg News, THE JOURNAL RECORD
WASHINGTON -- 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 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 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." 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. Any recommendations emerging from the review would have to be crafted into a rule proposal for consideration by the commission. …