…is a common mantra among
real estate agents who have long lived with stringent
disclosure laws and responsibilities. With enforcement
action beginning against public companies for unfair
disclosure, investment relations professionals are
quickly learning that the mantra may work for them too.
A case in point is Seibel
Systems, which has recently faced action by the SEC for
violating the Fair Disclosure act by disclosing
information to a select group of investment
professionals,. An important aspect of the investigation
is that the watchdog organization was tipped off to the
violation by a media report.
This is an example of why
public companies need to be more careful than ever about
how they discuss their business. By simply making
optimistic business comments to investment groups
without webcasting the discussion and thus making it
available to anyone who wants to log in, a company can
be accused of violating the act.
Many IR professionals are
just now beginning to understand the scope of the rule,
as enforcement actions begin to give the law some depth.
The Fair Disclosure act - a
close cousin to insider trading rules - was written to
provide a level playing field between institutional
investors and individual investors. Prior to the rule,
companies could have conference calls with institutional
analysts that excluded shareholders and the general
The rule states that
whenever a publicly held company (or its representative)
discloses any material non-public information, that
company must make the information available to the
public simultaneously. This has brought an explosion in
the use of webcasting for investment meetings, because
webcasting can be a very cost-effective way to meet the
If a company or
representative makes any relevant information available
unintentionally, as in a slip of the tongue at a private
meeting, then that information must be made public
How vague and ambiguous can
the rule become? The answer will be determined as
current and future enforcement actions are adjudicated.
In one case, Motorola has been charged with violating
the rule, but the SEC understands that it was done under
legal counsel, and is taking that into account.
professionals who are interested in more information on
Reg. FD and its impact on public companies, click
here for the SEC fact sheet.