The preliminary study, meant for internal consumption, was requested by acting SEC chairperson Laura Unger over initial objections of agency economists, say sources familiar with the situation. Ms Unger declined to comment.

SEC economists reportedly questioned whether a short-term study would provide meaningful results, but quickly produced a report analyzing the effect of the rule. The analysis reportedly compares trading following events such as corporate earnings announcements to see if volatility has changed since the disclosure rule began. It reportedly finds that, on average, there has been no discernible change.

Ms Unger was the only commissioner to oppose the rule, which was adopted by the SEC in August in a 3-to-1 vote. She plans to hold a round table discussion on the rule by early summer, soon after a roundtable on internet portals.

Regulation Fair Disclosure prohibits companies from disclosing important information only to a select audience, such as industry analysts. Instead, it requires firms to provide the same information simultaneously to the SEC or the general public.

Former SEC chairman Arthur Levitt, who championed the rule, predicted that it would provide a level playing field for investors by ending selective disclosure of information. Critics predicted that it would cause corporate executives to clam up, resulting in less information and more volatile trading.

"If it's working as intended, Regulation FD should be providing investors access to previously unavailable information," Ms Unger said earlier this month in a speech to the annual legal conference. While it appears that there is more publicly available information since the rule began, Ms Unger said concerns centre on whether the quality of available information "has been in any way diminished" by the rule.

Ms Unger said the SEC would monitor outside studies on the rule's effect in anticipation of its own study. At the request of commissioner Isaac Hunt, the SEC is supposed to study the effects of Regulation FD after it has been in place for a full year or more.

A longer-term study of the fair-disclosure rule is still in the works and should provide more valuable results than the short-term study, according to some SEC sources.

"You can't get meaningful economic studies based on a few months of data," one SEC contact said. "It's just too soon to tell."

Despite the early analysis, "the verdict is still out," on whether the rule has generated more or less information, and whether it is resulting in more or less stock-market volatility, another SEC source said.

Proponents of the rule say there doesn't seem to be a "chilling effect" in its wake, but rather, companies are announcing news earlier than usual and making more information available through open conference calls, Webcasts and meetings.

Initial results have been mixed, according to a National Investor Relations Institute survey released in February. That survey found that 48% of companies are releasing the same amount of information since the disclosure rule began, with 24% releasing less and 28% releasing more information.

Some suggest that the fair-disclosure rule is one convenient scapegoat for the market's recent fall. But other factors are also at work, ranging from the introduction of decimal prices on the New York Stock Exchange to the flurry of negative earnings reports from formerly high-flying technology stocks that dominate the Nasdaq Stock Market, observers say.

Even if the SEC rule is having an effect on market turbulence, the impact could be short-lived, as corporate executives get more familiar with what they can and can't do, others say. The upshot, sources say, is that there may be a bit more volatility in the short run, but less in the long run.

Understanding the effect of the rule on volatility may require as much as 24 months of data, some SEC sources say. A long-term study of the rule should look beyond volatility and consider the quantity of information available to investors, the quality of information, changes in analysts' coverage of companies, the effect on selective disclosure, and the cost of compliance, sources say. Others think the task could be an impossible one.

"Even if you had all the time in the world, I don't think you could conclusively determine what effect FD is having," one observer said.

(The Wall Street Journal)