SEC Chairwoman Promises More Guidance for Fair Disclosure Rule
The Securities and Exchange Commission’s acting chairwoman is promising companies more guidance on how to comply with Regulation FD, the SEC’s new rule barring disclosure of important corporate information only to a selected few.
At an informal round-table Tuesday with acting Chairwoman Laura Unger, some companies issued strong protests that the rule has left them struggling to understand what they can and can’t say in public and private forums. Many firms are fearful of running afoul of the rule and facing SEC sanctions.
“The interpretation of the rule has been a big problem,” said Bina Thompson, Colgate-Palmolive Co.’s vice president for investor relations.
The rule, adopted last fall, generally requires public companies to make “material” market-sensitive information available to all investors simultaneously, through press releases, SEC disclosure filings or other methods.
“It’s very difficult to determine what’s material,” said Kip Bedard, vice president for corporate affairs at Micron Technology, who called the rule a “nightmare.” He added that it’s also difficult to disseminate the information to different audiences at the same time.
Unger, who convened the round-table to explore the impact of the rule, insisted that “we don’t intend to enforce the rule before we make clear what the rule is.”
After hearing executives’ concerns, Unger said the SEC “could do more in providing guidance on materiality.”
Yet the SEC is reluctant to draw a “bright line” separating what it considers material from nonmaterial information, she said. “If we do that, someone will always walk right alongside it.”
Asked to clarify Unger’s remarks, David Levine, SEC chief of staff, said the agency intends to “bring only the most clear-cut cases” for disciplinary action until companies have had their questions about the rule answered.
The SEC is believed to be looking at about half a dozen companies for possible violations of the rule, but it hasn’t taken any action against a company so far.
Raytheon Co. is being investigated after the firm privately briefed analysts on its first-quarter outlook, according to people familiar with the probe. Motorola has acknowledged receiving SEC inquiries after at least six securities firms cut profit estimates a day after talking to company executives.
