US financial institutions fear they will be exposed to more
lawsuits following the adoption of new disclosure rules by the
Securities and Exchange Commission (SEC).
Regulation fair disclosure was finally passed in August,
prohibiting companies from divulging sensitive information unless
it is broadly disseminated. Individual investors cheered the
regulation, which they say stops company officials from tipping off
selected analysts and institutional investors before making
market-moving information public.
But bankers say the new rules, which control the disclosure of
what is termed "material" information, are too loosely defined and
could leave them open to being sued by the SEC. One Wall Street
general counsel says: "Most of the investment banks are outraged.
What if, with twenty-twenty hindsight, an SEC enforcement officer
trying to build a career decides something constituted material
disclosure and brings an enforcement action?"...