Full Disclosure--But Not For All?

AIMR contends Regulation FD is counterproductive.

Full and free disclosure of information can only make a market more efficient. But the Association for Investment Management and Research (AIMR) is arguing that forcing companies to dish out info to all comers on an equal basis is actually stifling the flow of news that can help investors make sound decisions on buying or selling stocks and bonds.

AIMR's position on the Securities and Exchange Commission's Regulation FD (for "full disclosure") may hint at its lobbying efforts with the Bush Administration, now that corporate lawyer Harvey Pitt has been nominated to succeed the retired Arthur Levitt, who championed the disclosure rule as SEC chairman. Indeed, the SEC has already signaled that "it is willing to look at the effects of Regulation FD has on industry," says AIMR President Thomas A. Bowman.

At a briefing at AIMR's annual meeting in Los Angeles on May 21, Bowman and Senior VP Patricia Doran Walters maintained that in the wake of the imposition of Regulation FD, corporations have started clamming up. While corporate executives formerly were able to provide guidance to selected analysts on corporate developments, "less information is flowing to the markets" now that these sessions must be open to all, Walters said. "Analysts are looking for insight into how companies will be managed with less information. There will be more guesswork."

AIMR's position is sure to be raise hackles among advocates for individual investors, who long have argued that selective disclosure of corporate developments put Wall Street's interests in front of those of consumers. It also highlights the difficulties of serving AIMR's twin constituencies, "buy side" fund managers and "sell side" analysts working for brokers and investment banks. In a recent poll of analysts, AIMR found that 69% of those on the "sell' side said information had become less available under Regulation FD. Among "buy" side analysts, however, only 57% thought that information had become scarcer.

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