SEC Wants Everyone to Know

August 15, 2000

Though strongly opposed by many securities insiders, the Securities Exchange Commission has announced new rules requiring "material facts" to be disclosed to the public simultaneously with release of those facts to selective individuals and companies. The new material is found in Regulation FD. This is likely to have a significant effect in the wild trading realm of technology stocks. Also, we can expect increased use by corporations of the Internet as it represents the most efficient way for companies to make information public.

The controversial new regulation broadens the risk provided by the older Rule 10(b)(5), in that violations of the new rule can trigger SEC enforcement for disclosure alone, without the requirement of a liklihood of effecting an actual transaction. The speed at which stock market information travels today across the Internet, and the increased volatility of stocks, was no doubt a factor in the SEC's decision to force greater disclosure. Stock market analysts, who in the past often obtained company information from friends inside, will be particularly challenged by the new regulation, especially until some history has developed.