Mum’s the word in wake of SEC disclosure rule

“When Mr. Rath, a portfolio manager for Safeco Corp., a Seattle financial-services company, phoned Micros on Monday to ask about particular customer accounts, his inquiry was met with a polite, but firm, rebuff. ‘Sorry,’ said Peter J. Rogers Jr., vice president of investor relations for the Columbia, Md., maker of hotel and restaurant computer systems, ‘but in the wake of the SEC ruling, we can’t discuss that.’ “

“It is a refrain being heard following the Securities and Exchange Commission’s approval late last week of a rule that seeks to make corporate information more available to individual investors by ending ‘selective disclosure.’ That’s a longstanding practice among many companies of relaying significant information via private conversations with big investors and Wall Street analysts.”

“The new SEC rule, known officially as Regulation FD (as in ‘fair disclosure’), mandates that a company release material, market-moving information to all investors simultaneously. It also requires that if company managers inadvertently disclose selective information, such as a spur-of-the-moment comment in a phone call, the company must publicize the information within 24 hours. Violations are punishable with injunctions and fines.”

“Though the SEC ruling is just days old, and won’t go into effect for two months, it is already having an impact.”

“Some corporate managers are evading queries, even about topics they would have discussed in the past, fearful answers might cross into forbidden territory. Mr. Rogers of Micros Systems says the information Mr. Rath sought was something his company’s managers typically ‘would have felt freer to provide’ more details on before the SEC decision.”

“The concern is even touching some areas that would appear to be safe. Teams of lawyers are being called on to approve information in news releases they wouldn’t have questioned in the past. Beth Saunders, a principal at Ashton Partners, a Chicago investor-relations firm, says one client had four lawyers in a meeting ‘to approve a single quote in a press release.’ “

“Ashton now is rereading transcripts of the past three quarterly conference calls of its clients, ‘highlighting all the things they said that weren’t widely disclosed so they’ll know what they can’t say now,’ she says.”

“Some advisers are counseling corporate clients to refrain from one-on-one conversations with the investment community, a staple of the industry. David Furbush, a partner in Brobeck, Pfleger & Harrison, says the Palo Alto, Calif., law firm plans to tell clients — including Cisco Systems Inc., i2 Technologies Inc. and E*Trade Group Inc. — that if it isn’t too detrimental to relations with analysts or others, forgoing such conversations ‘is the safest thing to do,’ based on what the SEC has disclosed so far.”

“Brent Anderson, investor-relations director at Dallas-based i2, says his company ‘isn’t about to cut the line’ of communication, but that more conservative counterparts are telling him ‘this is going to make us clam up.’ “