(November 10 – 15:20 ET) – Arthur Levitt took his case for fair disclosure to the Securities Industry Association in Boca Raton, Florida, today. In recent weeks, the chairman of the U.S. Securities Exchange Commission has been under fire for its new “Regulation FD.”

Improved disclosure and better analyst accountability are antidotes to investor cynicism about the way business is conducted in capital markets, he said.

Levitt suggested the U.S. self-regulators will be issuing guidance to members renewing the obligation of analysts to disclose conflicts whenever they recommend a security on TV or in written reports.

“Meaningful but workable disclosure in these very public settings is not beyond our reach,” he said. “Anyone who thinks this notion is ill-conceived or slightly paranoid need only look at the public’s reaction to a 15-year-old who made nearly $800,000 in profits through Internet fraud. Instead of being treated like a cheat, some hailed him a hero.”

“While conflicts are often unavoidable, meaningful disclosure shouldn’t be,” Levitt contended. “It is a crucial antidote to public cynicism.”

“I know that many of you in this room were adamantly opposed to the regulation, and may still be convinced it will increase volatility and dampen disclosure. But from what I’ve seen and heard first-hand, investors today do not need an analyst to interpret news — especially not earnings ‘guidance’ from a CFO — or an institutional trading desk to protect them from volatility.”

But the SIA seems to remain unconvinced. James Brinkley, SIA chairman and president of Baltimore’s Legg Mason Wood Walker, acknowledged that the SIA fought Regulation FD on the basis that it would have a tremendous chilling effect on the flow of information public companies provide to analysts.

“While our efforts succeeded in gaining significant improvements, we still have concerns about the regulation, so we’ll be monitoring its impact closely and reporting on what we have learned to the SEC,” Brinkley said.
-IE Staff