The Securities and Exchange Commission’s new Regulation FD, for fair disclosure, has put chief financial officers under the gun by prohibiting senior executives at companies from selectively disclosing to one or a select group of analysts, rather than to the broader investing public, information that could move their stocks. But although many finance chiefs think the new rule is flawed, even damaging to the very investors it seeks to protect, support is building for the measure, which took effect in October.
According to this month’s CFO Forum, just 24.1 percent of CFOs say they approved of Reg FD when it was first proposed in December 1999. Now 41.1 percent say they support it. Only 8.9 percent say they are undecided, compared with 25.9 percent who felt that way when the rule was first floated. Opposition to the new rule is little changed: Some 46 percent of CFOs, a plurality, say they disapprove of FD compared with 43.1 percent one year ago.
However they feel, companies are hurrying to comply. Already 86 percent have changed their policies regarding the disclosure of information. A relatively small minority - 15.7 percent - no longer permit top management to speak privately with analysts at all. More have taken such steps as restricting what management can say during meetings and conference calls with analysts. They are also disclosing information through Webcasts that include journalists and the public.
Why do so many CFOs still oppose the new rules? Only 12.1 percent say they had disclosed material information selectively to individual analysts before FD took effect. Half say that the new rules have reduced the amount of company information available to investors. A slim majority say FD has contributed to greater volatility in the stock market.
What was your opinion of the Securities and Exchange Commission’s Regulation FD, which prohibits the selective disclosure of material information by publicly traded companies, when it was first proposed in December 1999?
I supported it 24.1%
I opposed it 43.1
I was undecided 25.9
I was unaware of it at the time 6.9
Now that Reg FD has been in effect for some time, what is your opinion of it?
I support it 41.1%
I oppose it 46.4
I am undecided 8.9
I am not aware of it 3.6
Has your company changed any of its policies regarding the disclosure of information in response to Reg FD?
Yes 86.0%
No 14.0
If yes, how have you changed your policies?
No longer permit top management to speak privately with analysts 15.7%
Have discontinued conference calls between investment community and top management 2.0
Have restricted what top management can disclose during conference calls with analysts and investors 49.0
Have begun broadly disclosing more information than in past, not knowing what will be judged material under the rule 49.0%
Issue more press releases to broadly disclose material information 43.1
File more forms with SEC to broadly disclose material information 27.5
Have begun conducting Webcasts with analysts, investors, press and the public rather than private meetings or conference calls 54.9
Before Reg FD took effect, had you ever disclosed material information to one or more analysts with whom you had a positive rapport, instead of broadly disclosing that information?
Yes 12.1%
No 87.9
In your opinion, will sell-side analysts retain an advantage over buy-side analysts under Reg FD because they will continue to have access to material, nonpublic information while working on corporate finance transactions?
Yes 15.8%
No 84.2
Since Reg FD took effect, has your company found the need to issue a press release or an SEC filing to broadly disclose a piece of material information that was inadvertently disclosed to one person or a small group by management, as is required by the rule?
Yes 0.0%
No 100.0
Regardless of your answer to the previous question, do you find such a process overly onerous?
Yes 49.1%
No 50.9
Have you been more inclined since the passage of Reg FD to disclose material information to the news media, which is exempt from the selective disclosure provisions?
Yes 10.9%
No 89.1
In your opinion, what effect has Reg FD had on the overall amount of company information available to the investing public?
Increased it 23.2%
Reduced it 50.0
No change 26.8
In your opinion, has Reg FD contributed to greater volatility in the stock market?
Yes 53.6%
No 46.4
Has Reg FD made your job more difficult?
Yes 66.7%
No 33.3
The results of CFO Forum are based on quarterly surveys of a universe of 1,600 chief financial officers. Because of rounding, responses may not total 100 percent.
