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Does RegFD prompt disclosure or chill it?

Six months after a new rule governing corporate disclosures went into effect, the Street hashes out the impact it's had on the free flow of information.

Six months after a new rule governing corporate disclosures went into effect, analysts, investor-relations officials and lawyers on Tuesday got together at a Securities and Exchange Commission-sponsored meeting to hash out the impact the legislation has had on the free flow of information.

Regulation Fair Disclosure, known in the world of Wall Street as RegFD, requires companies to deliver material information to analysts and investors in an evenhanded manner. The idea was to give everyone a fair shot at getting information.

The rule had prompted concerns on several extremes, namely, that companies would clam up and refuse to give out information, or that they would give out too much information, prompting increased volatility in stock prices.

"In the spirit of RegFD," the Securities and Exchange Commission Webcast the event, acting SEC chairman Laura Unger noted. The meeting took place in New York and followed last week's roundtable discussion in which Wall Street rated the new regulation.

Chilling effect?
Not surprisingly, there was some disagreement as to whether the rule is having a "chilling effect" on the release of information.

While media panelists generally applauded the rule, saying it gives them greater access to information, analysts said that from their perspective, information is drying up.

"It means less disclosure," said David Berry, executive vice president at investment firm Keefe, Bruyette & Woods. While certain information is much more broadly disseminated, he said, what's missing is "the incremental information, the nuance with which we develop this mosaic. In one sense we're all surprised at the same time, but in the other sense there's less good information in the marketplace."

Investor-relations officials said their main concern is how to apply the rule. They are worried about determining what information should or shouldn't be disclosed.

"We've had a great deal of discussion and some debate," said David Shedlarz, chief financial officer of pharmaceutical company Pfizer. "It's difficult to know when our confirmation of private, previously made (guidance) is material...so Pfizer has erred on the side of caution. Therefore (we) issue press releases that state nothing has changed."

To report or not to report
Issuing news releases has its drawbacks, as several panelists pointed out.

"Issuing a news release every time somebody smiles or winks...can be like dropping a bomb on your stock," said Polly Pearson, vice president of global investor relations at EMC.

To keep investors and analysts abreast of information, EMC employs a range of techniques, she said, including Webcasting conference calls, putting editorial comments on the company's Web site and even calling news services to give EMC's opinion on issues affecting the market.

Intel also uses its Web site to keep investors informed, said Doug Lusk, director of investor relations. Instead of sending out news releases whenever company executives speak to analysts, it places notices about the meetings on the Web site, providing a variety of financial information and keeping it updated. Some analysts on the panel pooh-poohed the notion that companies were anxious to release information, saying it was in their best interest to "keep information close to the vest."

Almost all the attendees agreed that there was not enough information around to determine the best way to put RegFD into practice.

Judging from the day's discussion, Unger said, it appears the commission needs to focus on giving more guidance and determining the best practices and tools for disseminating information.