SEC to Pursue Fair Disclosure Case
The Securities and Exchange Commission plans to soon file its first case against a company for violating a 14-month-old rule that gives all investors equal access to important news, according to Chairman Harvey Pitt.
“There’s little doubt in my mind that there will be some enforcement action” under Regulation Fair Disclosure, Pitt said in an interview Friday. He wouldn’t name the company that he expects will be charged.
A case to enforce the so-called Reg FD may answer questions about whether Pitt, who criticized the rule when he was a private-sector lawyer representing brokerages, will go easy on companies that violate fair disclosure standards.
The SEC has been investigating at least half a dozen cases of possible violations of Reg FD, including Raytheon Co. (ticker symbol: RTN), the third-biggest U.S. defense contractor, and Motorola Inc. (MOT), the No. 2 mobile-phone maker.
Raytheon and Motorola both have denied any rule violations, which can lead to fines.
In previous comments as SEC chairman, Pitt, a Republican, has said broad reconsideration of Reg FD was not high on the agency’s agenda as it moves to address financial irregularities at Enron Corp. (ENE) and other problems. Though not advocating an overhaul of the rule, Pitt had not made clear when or whether the SEC under his leadership would bring an enforcement case.
“It’s likely there will be a case in the FD area sooner rather than later,” Pitt, who has headed the SEC since August, said.
Reg FD was intended to clean up a system that let companies parcel out important information to curry favor with select analysts or big investors. Former SEC Chairman Arthur Levitt championed the rule, saying selective disclosure was “a stain on U.S. markets” that often left small investors to learn about company developments only after others had traded on the news.
Since Reg FD took effect, scores of companies, including Bristol-Myers Squibb Co. (BMY) and Colgate-Palmolive Co. (CL), have opened quarterly earnings conference calls to all investors, or provided access to discussions through the Internet.
