| I assume so-I've never studied or really looked at the full disclosure(FD) regs until a couple days ago-I couldnt trade due to broker restrictions anyway and was just waiting for the uplisting as a true Vanguard/Warren Buffet type of long. I'm not w vanguard but they have a reputation as old school longs. I now suspect the illegal naked short position is 1 of the reasons shorters etc shouted "newsletter promo" ca 1-12-11 to get ce slapped because the rapidly rising pps was killing them. - this article by SEC speaker explaining FD attempts to define what is material info -the raiders as part of their attempts to silence /threaten longs-essentially claim that all dd/knowledge/wisdom outside of a PR is insider knowledge. I've highlighted pertinent info in the article-highlighting is mine The fact that he-Walker- says issuers are required to make difficult decisions on materiality every day shows that not all disclosures are material. We are witnessing an unequal application of the law (a constitutional violation in selective complaints brought against selective promoters only (selective in that demoters are not scrutinized and promoters are selected not on basis of materiality but rather the opposite -such as the current case where interested insiders working for an alleged hedge fund will personally profit along w their employer (the hedge fund -directly as in employees or indirectly as in contracted guns) while the big boys commit far worse than the alleged violation on a SOP basis that affects far more people Btw notice how the 2 complaints contradict each other re the single instance of the allegation- SEC complaint says fbi bought 500k shares on OPEN MARKET-DOJ complaint says Bob acted as a mm and matched a buyer and seller for that 500k shares-very bizarre and sloppy to contradict each other - 1 complaint is committing perjury and they have had almost 2 years and 3 months to get their story straight. . Speech by SEC Staff:
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| The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any private publication or statement by any of its employees. The views expressed herein are those of Mr. Walker and do not necessarily reflect the views of the Commission, the Commissioners, or other members of the Commission's staff. |
I would like to share with you today some of my views, and they are only my views and not necessarily those of the Commission or its staff, about our new anti-selective disclosure rule
, Regulation FD. The regulation became effective this past Monday and already I've witnessed its effect. For example, a friend of mine, who is a compliance officer at a large brokerage firm, played a tape for me of a recent conversation between one of his analysts, named Frank, and a company official, named Ernest. The conversation went like this: Frank
(the analyst):
Hey Ernest, it's Frank.
Ernest
(the co. official):
I'm really not allowed to say whether this is Ernest or not; the lawyers tell me I have to issue a press release first.
Frank:
Come on Ernest, since when did you ever listen to what your lawyers said? If you had let your lawyers lead you around by the nose, you would never have made all that money on the Bonanza acquisition, I told you about.
Ernest:
Frank, I really don't think it's a very good idea to bring that up...
Frank:
Ernest, all I'm looking for is a confirmation that you're still on track for the quarter.
Ernest:
I'm on my cell phone and I think we're breaking up. I can barely hear you.
Frank:
Please, that's the oldest trick in the book. Look, this is no big deal. We've had these conversations every quarter for the past 3 years.
Ernest:
How about them Yankees?
Frank:
Ernest, focus.
Ernest:
Did you see Piazza's face when Clemens threw the bat at him?
Frank:
OK, let's try to do this in code. Cough if the numbers are high and sneeze if they are low.
Ernest:
I'd rather not; I prefer a germ-free work environment.
Frank:
OK, no argument here. Do you speak pig Latin?
Ernest:
Give it a break Frank.
Frank:
I don't seem to be getting through here.
Ernest:
Good to talk to you Frank; stay in touch.
Humor aside, while FD only became effective last week, it has been part of our collective lexicon for almost a year now. The rule proposal had its supporters – primarily investors and consumer groups. And it had its opponents, including members of the securities bar and this association.
While the SIA's strong opposition to the rule might have made one think that the rule was intended to regulate the conduct of its constituency, the good news is that, in fact, Regulation FD is not primarily about you, the broker-dealer community. As you know, Regulation FD speaks directly to issuers and their representatives, and requires that when they communicate material nonpublic information to securities industry professionals or shareholders, they do so publicly, not selectively. Regulation FD places the responsibility for avoiding selective disclosure, and the risks of engaging in it, squarely on the issuer.
deleted some material here for brevity
I hope to convince you today there is no need for fear or hysteria, and you should not let the securities bar convince you otherwise. You also should be careful about some of the advice that has been circulating in client letters and various commentaries on the regulation. For example, some people have suggested that FD is satisfied by the filing of a "procedural 8-K" announcing that all future FD disclosures will be posted to the company's website. I can tell you the staff does not agree with this view.
Furthermore, Regulation FD was not designed as a trap for the unwary, as many law firms are counseling. In fact, the Commission took a number of steps in revising he final rule for the specific purpose of disarming many potential traps.
For example, under the express language of Regulation FD there is no liability under Rule 10b-5 for failure to make a public disclosure required by FD. This means that FD is not a fraud rule, and perhaps of greater importance, there is no exposure to private liability, which should go a long way in reducing anxiety levels.
In addition, the express language of the rule says that in order to violate Regulation FD, an issuer must have acted recklessly or intentionally in making a selective disclosure . What this means is that we're not going to second-guess close calls regarding the materiality of a potential disclosure. An issuer's incorrect determination that information is not material must represent an "extreme departure" from standards of reasonable care in order for us to allege a violation of FD.
Third, under Regulation FD, issuers are not responsible for selective disclosures made by mid-level management and junior employees. The revised rule carefully circumscribes the issuer employees and representatives for whose communications an issuer is accountable.
By eliminating these so-called traps, we minimized the risk that an issuer would inadvertently violate Regulation FD, and the consequences of so doing. Although I've heard industry spokespersons continue to claim that the rule has caused a "chilling effect" on communications, I personally believe that any such effect being observed is largely due to an over-abundance of caution, fed by the dire predictions of numerous law firms and others opposed to the rule.
In my own view, the market will reward companies that provide timely and reliable information to investors, and will treat more skeptically companies that do not. This should provide a powerful incentive for issuers to overcome any short-term apprehensions about communicating with the market for fear of running afoul of FD. I am confident that as issuers gain experience in dealing with FD, they will become increasingly comfortable with its requirements and will adjust their practices in conformity with the rule.
The fact that FD was drafted to avoid creating a trap for the unwary does not mean, however, that we will not enforce the rule. In this regard, I've heard enough speculation about how the SEC plans to enforce FD to fill the gossip page of any newspaper. Many believe that we are chomping at the bit to bring FD cases. One defense lawyer stated that when it comes to enforcing FD, SEC staffers will be "overzealous" because "they really want to push the envelope to make law and to make a name for themselves." I can assure you that this lawyer either needs cataract surgery or a new lens for his crystal ball.
Let me be clear. We are not looking to frustrate the purpose of the rule – which is to promote broader and fairer disclosure of information to investors – by second-guessing reasonable disclosure decisions made in good faith, even if we don't agree with them. Nor are we looking to test the outer limits of the rule by bringing cases that aggressively challenge the choices issuers are entitled to make regarding the manner in which a disclosure is made. There will be no FD Swat teams, and I do not envision any FD sweeps, unless, of course, there is widespread noncompliance with the rule, which I do not anticipate.
At the same time, however, you should understand that the Enforcement Division is not a toothless tiger. We expect issuers and others to conform their conduct to the requirements of the rule, and if they don't, we will take steps to make them do so.
In particular, we will be on the lookout for two types of violations. The first are egregious violations involving the intentional or reckless disclosure of information that is unquestionably material. This category includes the selective disclosure of information regarding mergers or acquisitions, earnings, or other matters that the courts or the Commission have long held to be material.
As you know, Reg FD draws a line in the sand separating material information, which cannot be selectively disclosed, from immaterial information, which can. A number of commentators and others have expressed concern that the line separating material from immaterial information, though sometimes clear and distinct (as in the categories previously mentioned), is often blurry. And these people fear that the SEC will second-guess difficult judgments on materiality. My response is twofold.
First, issuers are required to make difficult decisions on materiality every day . For the most part, they do so in a prudent and lawful manner. While FD may have added to the number of tough decisions that issuers must make, it has done so in an area where there already is substantial guidance available. The concept of materiality has been around since the inception of the federal securities laws over 65 years ago. Through case law, much of it in the area of insider trading, and staff guidance, there is a substantial, well-developed body of authority telling us the circumstances in which different types of information are and are not materia l .
Regulation FD's adopting release draws on this guidance and spells out seven items that should be reviewed carefully to determine whether they are material: earnings information; mergers and acquisitions; new products or developments regarding customers and suppliers; changes in control or management; change in auditors; a default or calling of securities; and bankruptcies .
This list puts the world on notice that an intentional or reckless selective disclosure of information falling into one of these categories is likely to draw the attention of the Enforcement Division. Of course, the list is not exhaustive . Nor does it suggest that information in these categories is always material. In addition, there still will be many situations that are not covered by the list and where good judgment will be required.
The second type of FD case I'd be interested in pursuing would be cases against those who deliberately attempt to game the system either by speaking in code, or stepping over the line again and again, thus diminishing the credibility of a claim that their disclosures were non-intentional.
The adopting release makes clear that selective disclosure of earnings information cannot come in the form of "indirect guidance, the meaning of which is apparent though implied." Providing a wink or nod, or a coded response calculated to convey indirectly information that cannot be disclosed directly is no different – and no more or less legal – than telling an analyst point-blank, "Our earnings will be down 10% this quarter."
In addition to winks and nods, we'll be on the lookout for situations involving multiple violations that an issuer claims were non-intentional. Regulation FD provides a delayed public disclosure for non-intentional violations. No violation will occur if the speaker did not act knowingly or recklessly and public disclosure is made within the later of 24 hours or the start of the next trading day on the NYSE. A pattern of "non-intentional" violations, however, surely will raise questions as to whether these were truly innocent slips .
The materiality of earnings guidance is the single item that has garnered the most attention... deleted material for brevity
Confirming prior guidance raises a tougher issue. The current views of our Division of Corporation Finance on this subject – and other FD-related subjects – were made public two weeks ago in guidance posted on our website
For analysts----deleted for brevity
The prohibitions against insider trading also remain relevant for both issuers and analysts alike. Regulation FD supplements – but does not replace – insider trading prohibitions. We promulgated FD because selective disclosure was essentially the legal twin of insider trading. Like insider trading, selective disclosure enables recipients of material nonpublic information to profit based on access, rather than skill, acumen, and diligence.
deleted a lot of material on analysts for brevity
While FD focuses primarily on communications between issuers and analysts .... deleted for brevity,
While disclosure practices will change, the role of the analyst remains valued and vital in our marketplace. I have no desire to see that role diminished through overly- aggressive enforcement of these new rules. My goal, which I stated at the outset, was to assure that Regulation FD was not designed as a trap for the unwary and to provide some level of comfort that we will be reasonable in enforcing Regulation FD . I hope I have succeeded in doing so. Thank you.
