Risk & Compliance

What’s in Store for Reg FD if It’s Not “In Play?”

Is Tuesday's roundtable the first step toward revision?
Ed ZwirnApril 23, 2001

Six months after Regulation FD (Fair Disclosure) was put into effect, the SEC will journey into the geographical heart of the investment community for a roundtable discussion centering on how it has worked so far.

SEC officials, led by acting Chairman Laura S. Unger, who was the only commissioner to vote against the rule when it was passed in August 2000, will converge on the Alexander Hamilton U.S. Customs House Auditorium in lower Manhattan Tuesday to hear feedback from a variety of issuer, investor, media, and legal sources.

The Customs House is just blocks from Wall Street, the chief target in the SEC’s campaign to level the playing field for the average, individual shareholder. A massive sculpture of a charging bull, the symbol of Wall Street optimism in all its glory, stands barely 50 yards in front of the building.

But Tuesday’s meeting will be the first one sponsored by the SEC since Reg FD became effective last October. By that point, it was apparent that the decade-long bull market had all but expired. While the rule can’t be blamed for the end of the bull market, the timing of its enactment was unfortunate from that perspective.

The rule aims to curb the practice of selective disclosure of “material non-public information,” and has been praised by some shareholder activists and critics of Wall Street who see it as a means of leveling the playing field among larger, well-connected investors and smaller players without the same level of access to information.

At the same time, Reg FD, which requires that a “non-intentional” disclosure of information must be followed up by a prompt public disclosure, has come under criticism for allegedly offering a disincentive for company officials to speak frankly to the press and analysts and spurring market volatility by making earnings warnings and similar “unofficial” communications more problematic.

David Levine, the SEC’s chief of staff, says the agency may propose revisions to the rule as soon as six weeks after the session.

Tuesday’s session will feature a “star-studded” program of participants, including CFOs of major firms, top securities analysts, media players and legal experts. Click here for full agenda.

The sessions will progress from 10 a.m. EDT opening remarks by Unger, through sessions on “the issuer perspective,” the “information disseminator and media perspective,” a panel for “securities analysts,” and one for investors.

But the lawyers will get the last word.

A session from 4 p.m. to 4:30 p.m. will offer “Observations of the Securities Bar,” and feature remarks by Harvey Pitt of the law firm Fried Frank Harris Shriver & Jacobson.

Pitt, who served as general counsel of the SEC in the 1970s, is, according to some media reports, the favorite to succeed Arthur Levitt as SEC Chairman.

“When we adopted [Regulation FD], Laura Unger made a public pledge to closely monitor its results,” Levine told CFO.com, adding that [Unger] “was not in favor of the rule when it was adopted.”

“She’s going into this roundtable with no preconceived notions,” he said.

On the other hand, Levine, while cautioning that “Reg FD is not in play,” said that the SEC hoped within “six to eight weeks after the roundtable” to come out with a document “summarizing it as well as maybe issuing some recommendations.”

Click here to read the full text of Regulation FD.

Click here for related articles from CFO.com and CFO magazine.

Reg FD Memo: Don’t Talk to Reporters

Reg FD and The Big Chill.

The Sounds of Silence.

The FD Effect.