Disclosure Rule May Increase Quantity, Not Quality, of Data

A 7-month-old securities disclosure rule seems to have increased the amount of information companies release while hurting the quality of data investors receive, a government regulator told Congress on Thursday.

But Regulation Fair Disclosure, which requires companies to report important information to all investors at the same time, needs more time to prove whether investors are being helped, Securities and Exchange Commission acting Chairwoman Laura Unger told the House Financial Services capital markets subcommittee.

“The consensus is clear that it’s too soon to assess the overall effectiveness of Reg FD,” Unger said.

The rule bars companies from giving earnings projections and other vital information to stock analysts ahead of small investors. A Wall Street industry trade group has called on the SEC and Congress to clarify what information should be included under the rule.

The Securities Industry Assn., the industry’s largest trade group, said at the hearing that companies were unsure of what was material information and were choosing to tell the market less for fear of breaking the rule.

“SIA believes that Regulation FD should be fine-tuned to better address this concern while minimizing its detrimental impact on the ordinary flow of high-quality information to the marketplace,” said SIA general counsel Stuart Kaswell testified.