Editorial: Selective disclosure ban is long overdue

Wednesday, Oct. 18, 2000 | 9:30 a.m.

A new Securities and Exchange Commission regulation goes into effect this week that should level the playing field for investors, requiring that everyone has access at the same time to market-moving information. The SEC notes that in the past publicly traded companies have disclosed important information, including advance warnings of earnings results, to a select group of securities analysts and institutional investors before disclosing the same reports to the public.

Selective disclosure, the SEC reasons, results in a loss of confidence when small investors see a stock's price change dramatically -- and only later find out it was due to the same information that market insiders had obtained before them. Another concern the SEC has is the "you scratch my back, I'll scratch yours" syndrome. Information sometimes is released to a few analysts to curry favor, which can result in the analyst reporting favorably on the company's performance.

As Sun reporter David Strow noted in a story Monday, a number of casinos are ready for the new rule, opening up their conference calls in which the executives talk about financial performance and outlook. While the calls still will have some restrictions, several casino companies will broadcast them live on the Internet. Not all analysts and investors are pleased with the new rule, however, saying the unintended consequence will be companies becoming too cautious in releasing information since there will be confusion as to what material actually is covered by the regulation.

This regulation was needed, though, much in the same way that insider trading is prohibited. More and more people are investing on their own, so it is important that even small investors have the same access to information as do the big institutional investors.