The Securities and Exchange Commission has reportedly stipulated that small investors be given access to the same information that companies engaged in mergers and acquisitions give to analysts. Companies will now be required to post these documents on the SEC's online database so that it can be accessed by all. The provocation for the move is the fact that until the formal documents are filed with the SEC, companies are in close contact with analysts, trying to calm their fears and putting their own spin on events. It's not just a question of information relating to mergers and acquisitions. The point which SEC chairman Arthur Levitt has been making is that analysts have access to sensitive information, unlike the ordinary shareholders. The argument is that there is a need to level the playing field.
If analysts are privy to information which is not available to the general public, and if they act on the basis of that information, then they become insiders, and the laws relating to insider trading should apply to them. So if analysts take positions in the market on the basis of information supplied to them alone, rather than to the general public, then they should be held guilty of insider trading. Companies frequently give special consideration to analysts because of the clout which institutional investors command. This is unfair to other investors. The way forward, therefore, not just for companies in the US, but all over the world, is for companies to release sensitive information immediately on their websites, so that it is available to the general public. There is no reason for disclosure to be selective.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.