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Life is More Complicated Now, Say Reg FD Survey
Respondents
Communicating More but Saying Less?
Individual Investors See Little Impact
Palo Alto, Calif. -- March 6, 2001 -- Regulation
FD (Fair Disclosure), the much
awaited and often dreaded new law that aims to give
individual investors the
same access to company information that professional
investors have, has
succeeded in making life for everyone involved more
complicated, a survey
conducted by Stapleton Communications Inc. found.
A total of 110 buyside and sellside market professionals,
company CEOs and
CFOs, and individual investors were surveyed during
the month of February by
Stapleton, a Silicon Valley-based investor and public
relations firm. Survey
details are available from the company's website
at www.stapleton.com.
More than 60 percent of the total respondents said
that operating under Reg
FD has been more difficult than before FD. (Seventy-seven
percent of the
buyside, 60 percent of the sellside and 55 percent
of the companies felt that
way.) Companies cited the need for more press releases,
conference calls and
the uncertainty of what can and cannot be said in
conversations as
complicating factors. The market professionals tended
to lament the lack of
easy, informal access to company management that
has resulted from Reg FD,
with many saying they think companies are "over-obeying" the
new law, and
unnecessarily shutting down communications that in
the past have been helpful
in understanding company and market dynamics.
Saying More/Saying Less
Not surprisingly, the survey found that companies
and market professionals
disagree about how well communication has been flowing
since the rule took
effect in October.
"
Many of the CEOs and CFOs (45 percent) of the companies
we interviewed
said they felt they were communicating more information
than they had
previously, but 61 percent of the buyside and sellside
people said they felt they
were getting less information than before. The market
professionals, especially
the buyside (69 percent), think the information flow
is significantly slowed. We
heard the sentiment over and over that companies
may think they are
communicating more, but as far as useful information
goes, they are saying
much less," said Deborah Stapleton, president
of Stapleton Communications
Inc.
There is little or no doubt that Reg FD has changed
the way companies
communicate with investors, but there is obviously
still some uncertainty
among the companies about what is and is not allowed.
Company
management specifically said they would like more
clarity from the SEC about
what is material. "Many in the market feel that
companies are being overcautious
about what they say, worried about what may be deemed
to have been
material, using 20-20 hindsight. But market professionals
will always want
management to say more rather than less, because
it makes their jobs easier,"
said Ms. Stapleton.
All this is complicated by the current economic and
market conditions and the
companies' lack of visibility into the rest of the
year. "When times get tough,
everyone is looking for an edge. Reg FD was designed
to eliminate any edge
for any particular person or group. In many ways,
it is counter-intuitive to the
Wall Street culture, and it is hard to unlearn all
those practices that have served
the market professionals so well in the past," said
Ms. Stapleton.
No big change for small investors
Has Reg FD helped the individual investors, the SEC's
target group? It is early
yet, but the initial feedback is that it really hasn't.
In fact, the majority of the
individual investors surveyed said they have never
heard of Reg FD, and almost
70 percent do not listen to conference calls or seek
out information on
companies' websites. Those who do are skeptical that
the playing field is really
even now. Sixty-two percent say they still don't
feel they are getting equal
access to information that the market professionals
have.
"
I think it is similar to Americans' attitudes about
voting: Everyone wants the
right and privilege to vote, but half the people
never take advantage of it. Most
people said they are too busy to take an active interest
in the stocks they own,
and they rely on market professionals to keep them
updated. So in some ways
we are back where we started," Ms. Stapleton
said.
Volatility and Instability
Clearly, the current instability of the market is
not due to Reg FD entirely, if at
all. But the feeling among 61 percent of the buyside
and sellside professionals
is that it has increased stock volatility, with 14
percent saying they are not sure.
Among companies, only 45 percent believe Reg FD has
increased stock
volatility, with 32 percent saying it has definitely
not.
About the Survey
Stapleton Communications Inc. conducted the Reg FD
Surveys, which were
designed to rate the impact of Reg FD on companies,
market professionals and
individual investors and were conducted by telephone,
facsimile and e-mail
during February 2001. Surveys were distributed to
250 individuals representing
Buyside and Sellside market professionals, CEOs,
CFOs and Investor Relations
professionals from small-cap and large-cap companies
and private investors.
One hundred and ten responses were received, representing
31 companies, 28
market professionals and 51 individual investors.
To receive a complimentary copy of the full results,
call us at (650) 470-0200 and ask for
the 2001 Reg FD Survey, or download the pdf(784k) here.
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