Fair Disclosure Rule Increases Importance of IR Leadership

9 March 2001

Regulation Fair Disclosure (Reg. FD) Increases Role of Investor Relations Officers (IROs), New Rule Elicits Energetic Debate Among Conference Panelists

March 2001 (Newstream) -- Four months since its approval by the Securities & Exchange Commission (SEC), Regulation Fair Disclosure (Reg. FD) is leveling the playing field between institutional and individual investors, and placing greater responsibilities in the hands of investor relations officers.

But, the new rule is causing a difference of opinions among the SEC, financial media, investor relations officers and analysts.

"What we heard from critics of Reg. FD just after the adoption of the rule last October was 'The sky is falling, the sky is falling,'" said Meyer Eisenberg, Deputy General Counsel, SEC. In his view, the sky did not fall.

"Issuers are acting responsibly and Reg. FD is achieving its goal of broader, fairer disclosure. The markets are fairer as a result of Reg. FD," continued Eisenberg. "The complaints of some analysts that they are not getting the kind of private access to 'juicy tidbits' as reported in a recent Wall Street Journal article, of corporate information since the adoption of Reg. FD, indicates that issuers are complying with the rule."

The impact of Reg. FD was the focus of a conference discussion at the Intercontinental Hotel in New York where an SRO audience of more than 150 investor relations officers, corporate communicators and public relations practitioners listened to strong and varied opinions by representatives from the SEC, Dow Jones Newswires, Abernathy MacGregor and Thomas Weisel Partners LLC.

Cathy Baron Tamraz, chief operating officer of Business Wire, the world's leading commercial newswire, moderated the Reg. FD conference

"The SEC adopted Regulation Fair Disclosure because it wanted to end the practice of selective disclosure, which favored institutional shareholders at the expense of individual investors and others," said Tamraz. "We want to gauge the real impact of Reg. FD on investor relations officers, the financial media, and securities analysts, as well as individual investors."

According to Mary Beth Kissane, senior vice president, The Abernathy MacGregor Group, Reg. FD is having a profound impact on IROs, who can no longer deal only with analysts, portfolio managers and investors. Increasingly practitioners find themselves playing an additional role as corporate spokespersons with the financial media.

"You can like it. You can not like it. But whatever you think, investor relations practitioners are working out the implications of Reg. FD," said Kissane. "All the recent surveys show an overwhelming movement toward compliance."

In a recent survey conducted by the National Institute of Investor Relations (NIRI) revealed that nearly 28 percent of its 577 member companies claim that the passage of Reg. FD is causing them to provide more information to their target groups, and 48% claim that they are providing the same level of information as before the passage of Reg. FD. Yet, the same survey also claims that 24 percent of NIRI's member companies are providing less information.

"Although it's not perfect, more people are thinking about Reg. FD," said Neal Lipschutz, senior editor, Americas, for Dow Jones Newswires. ""All things considered, both symbolically and practically, I think Reg. FD is proving itself to be a positive."

Lipschutz said that he is most dismayed by investor relations community's misinterpretation of Reg. FD as it pertains to the financial media. "Based on the First Amendment, the financial media is exempt from Reg. FD. The media's role is the dissemination of information. Additional education is necessary for all parties."

Conference participants expressed a core approval for Reg. FD; the main dissent came from H. Perry Boyle, director of East Coast Research, Thomas Weisel Partners LLC.

"Reg. FD has changed the landscape from quality to quantity of information," said Boyle. "Instead of receiving insightful information, we now receive boilerplate information because of the overwhelming caution that exists among IROs in light of Reg. FD."

"Reg. FD has had a positive impact on 'fair' disclosure, but it has done little regarding 'full' disclosure," continued Boyle. "Overall, we expect it to have little long term impact on the market."

"The perception of fairness is crucial to the market," concluded SEC's Eisenberg. "And Reg. FD is helping to ensure the market's fairness when it comes to the question of broad disclosure. Reg. FD is working."