The Securities Industry Association took its fight against Regulation FD to the U.S. Congress today.

Stuart Kaswell, senior vice president and general counsel for the SIA, testified before the House Committee on Financial Services about the securities industry’s views on Reg FD. The SIA has opposed it from the beginning, and says that some of its concerns have been validated in surveys of investors, issuers, analysts and securities firms.

The SIA says it found that, “while it may have some benefits, it is harming the quality of information from issuers, and may be a contributing factor to market volatility.”

The association has just completed a study of the impact of Reg FD, based on in-depth interviews with 30 buy-and sell-side analysts and 25 general counsels of issuing companies, a random telephone survey with 505 individual investors, and a survey of 94 SIA member firms. It says that Reg FD has contributed to the public’s overall perception of fairness in the market; that it has has encouraged analysts to conduct more independent research, and has accelerated the trend toward communicating material information to the public and securities professionals simultaneously.

But it also argues that it has produced a “chilling effect,” on the quantity and quality of information disseminated by the issuer; imposes significant costs; and could be a source of volatility. The SIA estimates that the costs of Reg FD will range from US$250 million to US$400 million for the rule’s first year of effectiveness.

The SIA says it is not seeking the repeal of Reg FD, but it wants changes to minimize the costs it adds. It is seeking a materiality standard for example. It also asks the SEC to to clarify the scope of derivative liability under the rule, among other possible changes.

Kaswell concludes, “We are eager to work with you and your colleagues, as well as the commission, to ensure that Regulation FD retains and enhances its benefits while minimizing some of the unnecessary constrictions that the rule has placed on the flow of quality information to the markets.”