SEC Probes Possible Fair Disclosure Violations

Federal securities officials, in the first test of the so-called Fair Disclosure rule requiring companies to report information to all investors at the same time, are investigating a number of firms for possible violations, a top official said Thursday.

“There are about half a dozen situations that we’re currently looking at” with regard to disclosure issues, said Stephen Cutler, deputy director of the Securities and Exchange Commission’s enforcement division.

Cutler, speaking after appearing at a legal conference, declined to name any of the companies or say when the investigations started or how the possible violations came to the SEC’s attention.

The Wall Street Journal, citing sources familiar with the situation, reported Thursday that the SEC was investigating whether defense contractor Raytheon Co. violated the disclosure rule. A Raytheon spokesman declined to comment.

Asked to characterize the companies under investigation, Cutler said, “I would say that there is no pattern” among them. “I would just have to say a range” of companies.

Regulation FD has been in effect since October and was one of the most contentious issues facing the SEC last year, drawing more than 6,000 comment letters.

The rule prohibits companies from giving important news to selected Wall Street analysts before announcing it publicly. It seeks to stop companies from giving briefings to a few people on market- sensitive information such as profits, new products and mergers.

Former SEC Chairman Arthur Levitt said the rule would level the playing field for small investors, giving them access to potentially market-moving information that only analysts and other big Wall Street players were previously allowed to hear.

Opponents argued that the measure would stifle the flow of corporate information to the markets.

Laura Unger, the sole Republican commissioner at the SEC, voted against Regulation FD, saying she doubted it would result in investors getting pertinent corporate information.

Unger, who now is the acting SEC chairwoman after Levitt left in February, recently said there might be a connection between the fall in technology stocks and the rule. “Anecdotally,” she said last week at the University of Cincinnati, “there seems to be a correlation between the quality of information under this new regulation and the drop in tech stocks.”

But on Thursday, Unger said that despite her vote against the measure, “Reg FD has been adopted, and the agency will enforce it like any other regulation.”

Cutler said the SEC has several enforcement options in its investigations. “Under the rule,” he said, “you could proceed administratively, seek a cease-and-desist order, or you could proceed in federal court and seek an injunction and penalties.”

Raytheon Class A shares slipped 45 cents to $27.80 on the New York Stock Exchange on Thursday.