When Street quakes, SEC wants you to know why

On Wall Street, information can move the market like an earthquake shakes the landscape, and federal regulators want to make sure every investor knows when to run for cover.

The Securities and Exchange Commission is gearing up to consider Regulation FD, which would require companies to release material information — the kind that can affect stock prices — to the public.

But Wall Street is fighting the idea, and a new survey suggests that retail investors are getting as much timely information as the pros do these days.

The Vienna, Va.-based National Investor Relations Institute says most public companies now let retail investors and the media in on conference calls, which were once the exclusive domain of analysts and institutional investors.

Eighty three percent of companies surveyed hold conference calls, and 82% give retail investors real-time access, compared to 29% two years ago. And, 74% of them let the media participate, compared to only 14% in 1998.

“There’s nothing wrong with that avenue for disseminating information, but we’re concerned it will become the only avenue,” says Stuart Kaswell, general counsel for the Securities Industry Association.

SIA officials insist the rule would have a chilling effect on the flow of information, because company executives would fear having one-on-one conversations with analysts or in a small group.

“They won’t know whether something is material,” Mr. Kaswell says. “So they’ll just stop talking. It’s our judgment that everyone is going to wake up one day and wonder where all the information went.”

But Louis Thompson, the institute’s president and CEO, says such concerns are overstated.

“I don’t see this as the great horror story for corporate communications that some have made it out to be,” says Mr. Thompson, whose group represents corporate officers and investor relations executives.

Of the 205 respondents aware of Regulation FD, 185, or 90%, say the rule wouldn’t significantly change their communication practices; a dozen (5%) say it would limit what they do, and eight (3%) say they aren’t sure.

Regardless, most companies are homing in on the advantages of making information more readily available to retail investors.

Mark Coker, founder of Los Gatos, Calif.-based BestCalls.com, which has been tracking and posting conference calls for thousands of publicly traded companies since last April, has seen a dramatic change in the mindset of corporate America over the last year.

“When we first launched, companies were just shocked that we would request conference call schedules so we could post them,” says Mr. Coker. “Based on our research, 75% of the companies — large and small — we called had a policy to not let investors in on their calls.”

Now, he says, “companies are recognizing that more information is better.”

Mr. Kaswell says the SIA supports companies’ opening up their conference calls. “`But caution is clearly going to force erring on the side of not talking.”

The proposal is no shoo-in, but investors do have SEC Chairman Arthur Levitt in their corner.

Mr. Levitt wants to arm investors with more information. In fact, the SEC also is preparing a proposal that would widen the audience for companies’ roadshows — promotional shows prior to an initial public offering — which typically exclude retail investors.

Although the institute had not taken a position on the proposal as of press time, Mr. Thompson did say that SEC staffers recently put his mind at ease about how they would enforce the rule.

“They said they’d look for patterns of selective disclosure,” he explains. “In other words, they’d look at a company over a year for major changes in their stock prices before publicly disclosing material information. That could indicate that a company has [made selective disclosure].