1 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION AMENDED TRANSCRIPT 2 REGULATION FD ROUNDTABLE 3 PAGES: 1 through 280 4 PLACE: Alexander Hamilton U.S. Customs House 5 Auditorium One Bowling Green 6 New York, New York 7 DATE: Tuesday, April 24, 2001 8 PRESENT: 9 LAURA S. UNGER, ACTING CHAIRMAN Securities and Exchange Commission 10 ISAAC C. HUNT, Jr., COMMISSIONER 11 Securities and Exchange Commission 12 KIPP BEDARD, VP CORPORATE AFFAIRS Micron Technology, Inc. 13 MARTHA DEMSKI, VP/CFO 14 Vical Inc. 15 DANIEL HANN, SENIOR VP/GENERAL COUNSEL Biomet, Inc. 16 DOUG LUSK, DIRECTOR OF INVESTOR RELATIONS 17 Intel Corp. 18 POLLY PEARSON, VP GLOBAL INVESTORS RELATIONS EMC Corp. 19 DAVID SHEDLARZ, EXECUTIVE VP/CFO 20 Pfizer Inc. 21 BINA THOMPSON, VP INVESTOR RELATIONS Colgate-Palmolive Co. 22 JOHN HUBER, ESQ. 23 Latham & Watkins 24 DAVID RUDER, PROFESSOR Northwestern University Law School 25 Diversified Reporting Services, Inc. - (202) 296-9626 2 1 PRESENT: (Continued) 2 DAVID ARMON, PRESIDENT 3 Americas Division, PR Newsire 4 MARK COKER, PRESIDENT BestCalls.com 5 RON INSANA, ANCHOR 6 CNBC 7 FLOYD NORRIS, CHIEF FINANCIAL CORRESPONDENT The New York Times 8 CATHY BARON TAMRAZ, COO 9 Business Wire 10 LOUIS THOMPSON, JR., PRESIDENT/CEO National Investor Relations Institute 11 PATRICIA DORAN WALTERS, SENIOR VP 12 Professional Standards & Advocacy Association for Investment Management and Research 13 DAVID BECKER, GENERAL COUNSEL 14 Securities and Exchange Commission 15 DAVID BERRY, EXECUTIVE VP/DIRECTOR OF RESEARCH Keefe, Bruyette & Woods 16 MICHAEL BLUMSTEIN, MANAGING DIRECTOR/DIRECTOR OF 17 NORTH AMERICA RESEARCH Morgan Stanley 18 H. PERRY BOYLE, DIRECTOR OF EAST COAST RESEARCH 19 Thomas Weisel Partners 20 FRANK FERNANDEZ, SENIOR VP/CHIEF ECONOMIST Securities Industry Association 21 CHUCK HILL, DIRECTOR OF RESEARCH - QUANTITATIVE DATA 22 First Call Corp. 23 STUART KARLE, ASSOCIATE GENERAL COUNSEL Dow Jones & Co. 24 ADAM LASHINSKY, Silicon Valley Columnist 25 TheStreet.com Diversified Reporting Services, Inc. - (202) 296-9626 3 1 PRESENT: (Continued) 2 DONALD LANGEVOORT, PROFESSOR 3 Georgetown University Law School 4 WILLIAM ATKINSON, ACTING CHIEF ECONOMIST Securities and Exchange Commission 5 ALAN CLEVELAND, SPECIAL LEGAL COUNSEL 6 New Hampshire Retirement System 7 TOM GARDNER, CHAIRMAN The Motley Fool 8 GREG HYMOWITZ, PRINCIPAL 9 Entrust Capital 10 GEORGE KIM JOHNSON, GENERAL COUNSEL Public Employees Retirement Association of Colorado 11 JOHN MARKESE, PRESIDENT 12 American Association of Individual Investors 13 ERIC ROITER, SENIOR VP/GENERAL COUNSEL Fidelity Management & Research 14 DAVID MARTIN, DIRECTOR 15 Division of Corporation Finance Securities and Exchange Commission 16 HERBERT WANDER, ESQ. 17 Katten Muchen Zavis 18 19 20 21 22 23 24 25 Diversified Reporting Services, Inc. - (202) 296-9626 4 1 CHAIRMAN UNGER: Good morning to all of 2 you, panelists and the audience. Welcome to the 3 SEC's Roundtable on Regulation Fair Disclosure, 4 which we will refer to as FD and Reg FD throughout 5 the day. 6 Commissioner Hunt and I would like to 7 thank each of the panelists for appearing on this 8 panel and on the consecutive panels this morning and 9 this afternoon and for making today's important 10 event possible. 11 Commissioner Carey regrets not being able 12 to be here today but he has promised that he is 13 going to listen to a replay of the events today. In 14 the spirit of Regulation Fair Disclosure, we have 15 arranged for the first time in the Commission's 16 history for the discussion to be broadcast over the 17 Internet. So good morning to everybody listening 18 from their home or office. 19 As everyone here knows, corporate America 20 has certainly seen change in its disclosure 21 practices with the adoption and implementation of 22 Regulation FD. As the packed house here this 23 morning reflects, there is a keen interest in how FD 24 is affecting investors, information disseminators, 25 analysts and investors. Diversified Reporting Services, Inc. - (202) 296-9626 5 1 My dissent from the Commission vote six 2 months ago to adopt Regulation FD was based on my 3 concern about how the rule would impact the quantity 4 and quality of information available to investors. 5 Today Commissioner Hunt and I are interested in 6 hearing firsthand from the people in the front lines 7 how FD has impacted the flow of information, and 8 what the information landscape looks like since 9 Regulation FD. 10 Holding this public roundtable is part of 11 Commissioner Hunt's and my commitment to monitor 12 Regulation FD. I join today's discussion with no 13 preconceived notion about what the outcome will be, 14 but will listen carefully to each of the panelists 15 and the discussion and will consider all of the 16 points raised. 17 I would like to turn the mike over to 18 Commissioner Hunt, and then I thought it would be 19 helpful for each of the panelists to do a brief 20 introduction of themselves and mention the company 21 they are from. Panelists may make preliminary 22 remarks, although because we have a pretty tight 23 schedule today, you certainly don't have to make a 24 lengthy set of remarks. 25 So, Commissioner Hunt? Diversified Reporting Services, Inc. - (202) 296-9626 6 1 COMMISSIONER HUNT: Good morning, ladies 2 and gentlemen. I want to join with Chairman Unger 3 in welcoming you all to this session on Regulation 4 FD and thank you for taking the time to come to this 5 program today. 6 This, in my view, is a part of what we 7 promised we would do when we promulgated Regulation 8 FD, which is to closely monitor its effects both in 9 terms of scientific analysis of what was going on as 10 well as what can be done and in any other way we 11 can. So this is one of our important early steps to 12 study the consequences intended and unintended of 13 Regulation FD on corporate America and the 14 securities market. 15 I didn't dissent when we promulgated 16 Regulation FD. I figured half of my life was 17 involved in it so there was no point in dissenting 18 from it, but I am glad to see so much interest and I 19 look forward to hearing from the participants today. 20 And, again, thank all of you for coming in and 21 participating in this program. 22 CHAIRMAN UNGER: John, do you want to 23 start? 24 MR. HUBER: My name is John Huber, I am 25 a partner at the firm of Latham & Watkins. I Diversified Reporting Services, Inc. - (202) 296-9626 7 1 practice corporate securities law. In a former 2 life, I was the director of the division of 3 corporation finance at the SEC and wrote a lot of 4 rules. Most of the rules that the people here don't 5 like or comply with every day, I was involved with. 6 I am a commentator on this panel and so, 7 therefore, I will keep my remarks very short. I 8 think that FD is a challenging rule, one that has 9 got different impacts on different companies. And 10 in a survey that the American Bar Association did 11 surveying its members, one of the most interesting 12 results of that survey was that there was a 13 conclusion that FD had bigger impacts on small and 14 midsize companies rather than large companies. 15 I think that that, at least in my 16 practice, is true. And one of the points of 17 reference for that is the question of materiality 18 and how that affects it. But, more importantly, I 19 think making FD workable in this environment and 20 taking some of the pressure points with respect to 21 how FD works would make it a more efficient system 22 and also take less cost in terms of compliance. 23 The critical question from my side is: 24 Is FD a rule of fair disclosure or is it a rule that 25 is designed to provide equal access to information? Diversified Reporting Services, Inc. - (202) 296-9626 8 1 The answer to that one question, really, in my mind 2 goes a long way in terms of how FD should work in 3 the future. 4 MR. HANN: Good morning, my name is Dan 5 Hann, I am senior vice president and general counsel 6 of Biomet. I am also here today representing the 7 Association of Publicly Traded Companies, of which 8 Biomet is a member, and I thank you for having me 9 here. 10 In general, I think Regulation FD is 11 certainly welcome. I can certainly say that I love 12 my mother, apple pie, and I am certainly against 13 selective disclosure. I also thought that FD stood 14 for fewer disclosures, so I am pleased to learn that 15 it is fair disclosure that we are talking about. 16 In general, I think Regulation FD has 17 leveled the playing field. My principal concern 18 would be that we have a lower level playing field. 19 I think there are both qualitative and quantitative 20 issues, and I will hold my remarks until we get into 21 that. 22 Thank you. 23 MS. THOMPSON: Good morning, I am Bina 24 Thompson, I am vice president of investor relations 25 at Colgate-Palmolive Company. Actually, I am also Diversified Reporting Services, Inc. - (202) 296-9626 9 1 here as president of The Investor Relations 2 Association, which is a group of senior IR 3 professionals across the country, from small and 4 large cap companies, that I have been chatting with 5 and polling over the last few weeks, after Laura 6 invited me to speak, to get their views. 7 So as we get into the discussion, I do 8 have some thoughts and I think that probably I will 9 be able to give you their thoughts as well as my 10 own. 11 Mr. SHEDLARZ: Good morning, I am David 12 Shedlarz, I am the executive vice president and 13 chief financial officer of Pfizer. I am also the 14 co-chairman and the principal of Financial Officers 15 of the Business Roundtable. 16 I do have a short statement that I would 17 like to make. I think, most importantly, I would 18 like to thank Acting Chairman Laura Unger and 19 Commissioner Hunt for having this discussion. I 20 think it is critically important especially when we 21 have something as pervasive and as significant as 22 Regulation FD that the SEC does take the opportunity 23 to see how the regulation is taking hold within the 24 industry and what types of things are meeting 25 expectations and what types of things may not be Diversified Reporting Services, Inc. - (202) 296-9626 10 1 meeting expectations and may point to the need for 2 some changes. 3 I think everybody is aware of the fact 4 that Pfizer is a large company with a long tradition 5 of publicly disclosing a great deal of high quality 6 information to all investors, both big and small. I 7 am fond of saying we are competing for investors as 8 we compete for folks we sell our products to. 9 At Pfizer, we believe in giving timely 10 information in an understandable manner to all 11 investors. And it gives us more of an advantage, we 12 believe, in attracting investors. Given that 13 philosophy, what I must admit are the resources to 14 support broad disclosure, Pfizer has not 15 significantly altered its disclosure practices with 16 market professionals and investors after the 17 institution of Regulation FD, with one exception. 18 And that's with respect to direct and indirect 19 guidance as it relates to earnings estimates. 20 I think it is important to give you some 21 background in that regard. For the most part, it 22 hasn't changed the way we practice dealings with 23 analysts and investors. We still have robust 24 quarterly earnings releases pertaining to forecasts 25 and projections. The earnings releases also contain Diversified Reporting Services, Inc. - (202) 296-9626 11 1 an extensive Q&A section which covers our financial 2 and operational performance and other topics of 3 interest to both analysts and investors. For 4 example, in the first quarter of this year, the Q&A 5 section ran to almost 40 questions. 6 We believe this allows all investors to 7 become familiar with important issues that affect 8 our company. And, in addition, as we did before 9 Regulation FD, we invite analysts and the public to 10 an investors conference call that is held the day of 11 our earnings release, at least by means of a 12 webcast. 13 Also, as we did before Regulation FD, we 14 publicly distributed our earnings prior to this 15 rule. So for the most part, Regulation FD has not 16 affected our disclosure practices. One challenge we 17 have faced with Regulation FD is in the area of 18 earnings guidance. We have had a great deal of 19 discussion and some debate at Pfizer as to what and 20 how best we are going to provide ongoing comfort for 21 both the operational and financial outlook of the 22 company. 23 In particular, it is difficult to know 24 exactly when our confirmation of prior publicly made 25 earnings expectations by the company to an analyst Diversified Reporting Services, Inc. - (202) 296-9626 12 1 may be considered material. There is no bright line 2 test, so since it is not clear when our 3 reconfirmation of earnings estimates to an analyst 4 would be deemed material; Pfizer has erred on the 5 side of caution. We, therefore, issue press 6 releases which essentially state that nothing has 7 changed during the course of a quarter. 8 We have felt it prudent on a number of 9 occasions, before executives have spoken with 10 analysts either one-on-one or at conferences, to 11 issue a press release which essentially said nothing 12 has changed. So we have not curtailed the 13 information to analysts and we have not 14 significantly expanded the scope of information 15 disclosed to the public. We are releasing 16 additional earnings guidance. 17 While Regulation FD has not affected the 18 amount of quality information that Pfizer discloses, 19 there has been a fair amount of debate by the 20 industry in terms of connection with Regulation FD. 21 For example, when the Business Roundtable asked its 22 members in September of last year if they thought 23 the final rule would reduce the total amount of 24 information a company would release, 40 percent said 25 they did not expect to reduce the total of Diversified Reporting Services, Inc. - (202) 296-9626 13 1 information, 36 percent did say it was too early to 2 tell. 3 I believe there are three things that 4 would help in terms of Regulation FD that the 5 Commission might consider. One, to provide 6 additional guidance on how to apply this Regulation, 7 particularly more direction on ongoing earnings 8 guidance. 9 Secondly, to provide more information to 10 public companies on how the SEC will enforce 11 Regulation FD, how many cases will you bring, who 12 will you go after. Since there is so much gray area 13 on what is material, will the SEC be second-guessing 14 good corporate citizens? 15 Lastly, I believe companies are looking 16 for forums like this one to both analyze the impact, 17 both intentional an unintentional, in terms of the 18 consequences of Regulation FD. Again, with regard 19 to the last point, I herald the SEC in terms of 20 having this session today to give us all an 21 opportunity to speak about the consequences of 22 Regulation FD, both intentional and desirable, and 23 maybe some that are not intentional. 24 Thank you. 25 MS. PEARSON: Good morning, my name is Diversified Reporting Services, Inc. - (202) 296-9626 14 1 Polly Pearson, I am the vice president of Global 2 Investor Relations, EMC Corporation. 3 EMC is the top performing stock in the 4 last ten calendar years, and it has been my pleasure 5 to run investor relations over the course of that 6 time. Our philosophy at EMC has always been one of 7 inclusive communication with investors of all sizes 8 and all locations, rather than exclusive. So the 9 passage of Reg FD was not a big deal to EMC. 10 Our theory, really, with the passage of 11 the Safe Harbor legislation, that we were active 12 proponents for in the mid '90s, has been to mass 13 market the message. Once we were allowed to make 14 forward looking statements, our belief was that in a 15 supply and demand dynamic, why would you want to 16 diminish the demand for your share? So, share the 17 message with all that would hear it. 18 So our time is spent not so much on if we 19 should share or disclose information, but how we 20 should do it in a palatable manner to the mass 21 market. As we practitioners know, issuing a news 22 release every time somebody smiles or winks or 23 something that someone might consider material, it 24 could be like dropping a bomb on your stock. So our 25 time has been spent on ways to consider sharing Diversified Reporting Services, Inc. - (202) 296-9626 15 1 information, doing things like live webcast 2 conferences posted on EMC's website in real-time, an 3 editorial posted on our website with URL's passed on 4 to journalists and investors asking them to look at 5 them, rich media videocasts. 6 Last year we did our annual meeting with 7 a live interactive rich media videocast to the 8 world, and I felt a little bit like Sue Herrera, 9 saying, "Now I would like to take the next question 10 from John in Bar Harbor," as we very much had an 11 interactive dialogue with remote and in-house 12 investors. It was very successful. 13 Also we have called up wire news 14 services, such as Dow, Reuters, Bloomberg and CNBC, 15 before the market opens, just offering our opinion 16 on something that the market might be very concerned 17 with or consumed with that day, such as "How is 18 business in Europe? XYZ high-tech company just fell 19 off the cliff because their business is bad," where 20 normally we would say, "Our business might have been 21 on track." 22 Prior to FD, we started thinking about 23 "What are better ways we can do this, to mass market 24 the message?" And it has been just a delight as a 25 practitioner, because once we mass marketed the Diversified Reporting Services, Inc. - (202) 296-9626 16 1 message and informed Dow Jones and offered our 2 comments, then our call volume diminished rapidly 3 coming into the company and all investors had the 4 message at very same time. 5 And then, finally, the newest tool that 6 we have been exploring is the idea of issuing an 7 open statement, a statement that is more 8 conversational, and distributing the statement over 9 business wire or other mass market media, instead of 10 issuing a news release that has some of the baggage 11 that goes along with being something that you are 12 trying to hype as newsworthy. Whereas, a statement 13 is more of an open communication with investors and 14 other interested parties. 15 So with that, I very much am in favor of 16 Reg FD, especially the SEC's notice of the word 17 "intent." It is our intent to always have an open, 18 honest, fully-disclosed dialogue with investors. 19 Now, in the high-tech world, in particular, it is 20 very fast-paced, you are moving in real-time. 21 People throw questions at you. Investors or 22 executives respond, but it is always our intent to 23 do the right thing, so I would vote for less 24 regulation and more use of that word "intent." 25 And with that, I will close. Diversified Reporting Services, Inc. - (202) 296-9626 17 1 CHAIRMAN UNGER: Kipp? 2 MR. BEDARD: Good morning, everyone. I 3 would like to thank you for allowing my firm to 4 participate in this Roundtable today. 5 In my role as vice president of corporate 6 affairs of Micron Technology, it is a day-to-day 7 responsibility for me to coordinate information that 8 goes to various public investors, municipal 9 communities, government officials, the media, not 10 only on the corporate business side but also the 11 product side. So most of my comments today will 12 come from the perspective of practical application 13 of Reg FD and what kind of implications it could 14 have on all those various components. 15 So, again, I am glad to be here and I 16 appreciate the opportunity to speak. 17 CHAIRMAN UNGER: Martha? 18 MS. DEMSKI: Thank you. 19 I am Martha Demski, I am the chief 20 financial officer of Vical, which is a San Diego 21 based biotech company. 22 Initially my comments today will 23 represent many of the publicly traded biotech 24 companies in the San Diego area. I am a member of 25 an association called the Association of Bio Science Diversified Reporting Services, Inc. - (202) 296-9626 18 1 Financial Officers and, prior to today's meeting, I 2 have polled several of the public companies in the 3 San Diego area in biotech to get their views on Reg 4 FD, and I will share those views with you today. 5 MR. LUSK: I am Doug Lusk, director of 6 investor relations at Intel. I have been with Intel 7 for about 13 years, the last six years or so in 8 investor relations. 9 Just some brief comments. I think we 10 have a somewhat unique perspective in this. We, 11 since 1996, have been giving forward-looking 12 statements after the passage of Safe Harbor, and 13 pretty explicit forward-looking statements. We 14 really go through the whole P&L, revenue, gross 15 margin percentage, spending, depreciation, tax rate, 16 et cetera. Really, our expectation for the next 17 quarter and sometimes we will give an expectation 18 for the full year for things such as gross margin 19 and capital expenditures. 20 Really, in a nutshell, our IR procedures 21 and policies have changed very little since the 22 passage of Reg FD. One thing we did grapple with 23 was that we still wanted to have one-on-ones with 24 investors and analysts, et cetera. And if we 25 reiterate at that time, could that be construed as Diversified Reporting Services, Inc. - (202) 296-9626 19 1 somehow as being material pieces of information? 2 What we have done is place on the 3 websites for the general public the fact that we 4 will have these meetings, and as long as we have 5 still posted on our website the current 6 expectations, they can rely on those as being 7 current and up to date. And that's really one of 8 the things we have done. 9 We have been webcasting our conference 10 calls for a number of years to people. We are 11 having an analyst meeting here in New York City in a 12 couple of days that will have thousands of people, 13 the general public, listening on webcast. It is 14 important to Intel -- we have approximately 40 15 percent of our shares owned by retail investors, so 16 it is important for us that they hear the same 17 information as our meeting analysts. 18 Thank you. 19 MR. RUDER: My name is David Ruder, I am 20 a Professor of Law at Northwestern University School 21 of Law. I had the privilege of serving as the 22 Chairman of the Securities and Exchange Commission 23 from 1987 to 1989. 24 I would first like to congratulate the 25 Commission on enacting Reg FD. The Commission was Diversified Reporting Services, Inc. - (202) 296-9626 20 1 faced with a problem in relation to the Dirks 2 decision, in which analysts were able to receive 3 selective information from companies and absorb it 4 without running afoul of the insider trading rules. 5 This problem of selective disclosure was 6 one that the Commission had to grapple with, and I 7 think it has done so in a way that will inure to the 8 benefit of the investing public. That's not to say 9 that the rule is perfect, and I think it is a very 10 fine step for the Commission to have this meeting to 11 hear what might be fixed. 12 I expect to hear answers to various 13 questions: Are disclosures increasing or 14 decreasing? Are there more earnings projections 15 being made? Is there more guidance being provided? 16 Is FD too costly, particularly for smaller 17 companies? Does FD meet the problems of disclosure 18 for small cap companies? Is the Commission's 19 materiality standard one which is livable for 20 companies? And are the provisions for making 21 disclosures to the public adequate in light of new 22 technology? 23 These are just a few of the questions, 24 but I am awaiting eagerly to hear the answers from 25 the commentators. Diversified Reporting Services, Inc. - (202) 296-9626 21 1 MR. BECKER: I am David Becker, I am 2 general counsel of the Commission. 3 I think the staff's role here is 4 principally to sit and listen and learn and maybe 5 pose the occasional question. I would add only one 6 to David's list, and that is: What do people mean 7 when they use the word "guidance"? 8 It can mean all sorts of things, and I am 9 interested in what it is that companies do that they 10 refer to as guidance and what is the purpose and the 11 effect of giving guidance? 12 CHAIRMAN UNGER: Thank you to all the 13 panelists. In your introductory remarks, I think 14 you have raised a number of very interesting issues 15 that I hope we have a chance to cover. 16 I thought we could start off with one of 17 the more basic questions, which is, I think most of 18 you have said you haven't really changed your 19 practices substantially as a result of Reg FD, but 20 has it changed how you tell your analysts 21 information and convey the information? 22 Has it changed what you tell them? 23 Does anyone care to respond or shall I 24 call on you? 25 MS. PEARSON: I would say it has not Diversified Reporting Services, Inc. - (202) 296-9626 22 1 changed what we tell investors. If anything, there 2 is a heightened degree of awareness; is that 3 something that is material? But, if anything, we 4 have been open to the same degree before and after. 5 COMMISSIONER HUNT: Somebody on the 6 panel, I think, mentioned -- and somebody outside 7 also mentioned to me -- the ogre of enforcement. 8 Are you concerned about that at all? 9 MR. SHEDLARZ: I think there is some 10 concern in terms of exactly how Regulation FD will 11 be practiced. 12 In part, there are no bright line tests 13 here, so I think in large part the nature of 14 Regulation FD is going to be defined on the basis of 15 practice. I think in terms of guidance, maybe it 16 has to lead to that in terms of how Regulation FD, 17 in fact, will be practiced. 18 I think that will give much greater 19 clarity to those concerned and possibly some of 20 those who are taking a conservative posture, 21 there's a wait-and-see attitude. At Pfizer, we have 22 not changed the nature of our disclosure. 23 It always had been quite robust, it has 24 been done on a frequent basis. In certain respects, 25 that has been demanded by the marketplace. I must Diversified Reporting Services, Inc. - (202) 296-9626 23 1 admit that Pfizer does have the resources to 2 accommodate something like that. And it is 3 long-standing history that we have practiced in such 4 a way in terms of providing robust disclosure to all 5 investors. 6 But I imagine for some this could be an 7 encumbrance. 8 CHAIRMAN UNGER: How many analysts 9 follow Pfizer? 10 MR. SHEDLARZ: There are probably 30 11 analysts that follow Pfizer with an 12 ever-increasingly magnified microscope. 13 CHAIRMAN UNGER: I am curious because I 14 have heard initially, and still from a number of 15 large issuers, that they welcome FD because it sort 16 of made their job and their life a little bit easier 17 in terms of communications. 18 But how about the smaller issuers who are 19 still building a relationship with the analysts, has 20 that encumbered that relationship at all? 21 MS. DEMSKI: Most of my comments will be 22 with respect to several of the biotech companies in 23 the San Diego area on this particular issue. With 24 respect to the smaller companies that are seeking 25 analyst coverage, they may have only one firm Diversified Reporting Services, Inc. - (202) 296-9626 24 1 analyst relationship and are seeking additional 2 analyst coverage, it does pose a problem. 3 And they feel that it has hampered them 4 somewhat in their ability to attract analysts to 5 follow the company. So that is one set of feedback 6 that I have received in regard to Reg FD. 7 COMMISSIONER HUNT: As a follow-up maybe 8 relating to that, do you think that in your 9 experience, that Regulation FD is cost effective for 10 those relatively small companies? 11 MS. DEMSKI: I posed the question of 12 cost to each of the companies that I polled. In 13 each and every instance they said it was a minimal 14 cost issue. 15 With respect to Vical, we had already 16 planned to implement conference calls and webcasts, 17 it just accelerated it by one quarter. So it was a 18 non-event in that regard. And from a cost 19 standpoint, everyone unanimously said it was not an 20 issue. 21 MR. HUBER: If I could just interject, 22 cost is more than just a question of the compliance 23 cost. There is also the cost with respect to 24 training management in terms of keeping them up to 25 speed with respect to developments. The people who Diversified Reporting Services, Inc. - (202) 296-9626 25 1 are senior officials, there is the cost with respect 2 to if you are doing an offering and paying different 3 interest rates for your bonds because of a change 4 due to disclosure. 5 It also a question of cost with respect 6 to market volatility. Have more people seen costs 7 in other areas besides just the compliance cost 8 itself? 9 MS. DEMSKI: I certainly think that with 10 respect to the cost question, many of the companies 11 in San Diego answered from just the bottom line 12 impact with respect to the cost of the conference 13 calls, et cetera. However, one company did indicate 14 that they felt there had been an impact on the 15 volatility of its stock. 16 COMMISSIONER HUNT: FD had an impact on 17 it? 18 MS. DEMSKI: They felt that it did have 19 some impact on volatility. 20 CHAIRMAN UNGER: And how were they able 21 to distinguish between the market conditions that 22 exist perhaps in the six months, coincidentally, 23 some would say, in the six months subsequent to the 24 adoption of FD with their own stock and the release 25 of information? Diversified Reporting Services, Inc. - (202) 296-9626 26 1 MS. DEMSKI: They did not comment on 2 that specifically, but certainly the biotech sector, 3 as well as many other stock issues, have experienced 4 great volatility during the past year. 5 However, in this particular instance, in 6 their response they indicated that they felt it was 7 due to more limited discussions with the analysts 8 and the analysts writing less. 9 COMMISSIONER HUNT: Former Chairman 10 Ruder mentioned that one of the things we are trying 11 to do is deal with the problems in particular that 12 were created by the Dirks case. 13 I would like to know from these 14 panelists, after the issuance of Reg FD, do you 15 treat requests for information from the press and 16 from analysts differently? 17 MR. LUSK: I guess the answer, in all 18 fairness, is no. The press is dealt with through 19 our PR firm, which is a separate organization. I 20 can't speak for them, but clearly we would handle 21 requests separately. 22 Are you saying things like interviews 23 with executives or meetings? 24 COMMISSIONER HUNT: Yes, meetings, 25 interviews. Diversified Reporting Services, Inc. - (202) 296-9626 27 1 MR. LUSK: We balance that. Obviously, 2 executives are very busy people and we have to 3 balance the best return on their time, so we do 4 both, and will continue to do so. 5 Also, getting back to your original 6 question, very little has changed in what we talk 7 about with analysts, investors. I think, in part, 8 because we have for five years issued forward- 9 looking statements and it is really a frame work for 10 the meeting. 11 Our analysts are pretty-well trained, I 12 think, over the last five years and they know when 13 they walk in to a meeting, even if it is a 14 one-on-one, they are not going to get information 15 that is going to be any different from what we put 16 in a press release. That is our expectation. 17 So both sides of the table can go ahead 18 and have a free conversation about other things. We 19 are a fact-based industry, we have lots of different 20 products, two-thirds of our sales are overseas, and 21 we are trying to expand it to do business. There is 22 lots that you can talk about in one-on-ones that 23 does not touch on material information, how the 24 quarter is going. So from our perspective, very 25 little has changed. Diversified Reporting Services, Inc. - (202) 296-9626 28 1 I did talk about some changes in 2 implementation, but I think we have seen very little 3 change in the flow of information. In fact, this is 4 not really because of FD, but in the spirit of it, 5 we are also doing a mid-quarter conference call 6 update now. We just started this quarter where we 7 will open this up to the general public and webcast 8 it also, and give an update about six weeks or so 9 into the quarter, on how business is progressing. 10 MR. RUDER: I am going to assume that 11 all the panelists here would say that "Our 12 disclosure practices were wonderful before and they 13 are wonderful now," but I would like to just 14 follow-up on John Huber's question a little bit. 15 It seems to me that what is going on in 16 some companies is that the legal counsel had 17 insisted that there be a much more structured method 18 of releasing information. That has had, I think, 19 costs of one kind, and certainly for outside 20 counsel's cost if that's where it is coming from, 21 but also more discipline on management and public 22 relations people as to how disclosures are made. 23 I wonder if anybody could comment about 24 what other companies are doing, other than the ones 25 that are here? Diversified Reporting Services, Inc. - (202) 296-9626 29 1 MR. HANN: I think you are correct, it 2 has certainly changed the way companies, I believe, 3 deal with the investment community. We do have 4 legal counsel setting up policies, procedures, best 5 practices, and educating the management team. 6 I would also like to come back to 7 Commissioner Hunt's question and David's comments. 8 I think the SEC has a real opportunity for Reg FD to 9 be successful. You want issuers to be comfortable 10 releasing more information, more specific 11 information. There is an incredible interplay here 12 between Reg FD and the Safe Harbor for 13 forward-looking information. 14 And I think one thing the Commission can 15 do is make that harbor deeper and wider, and that 16 will encourage issuers to be more forthcoming. 17 There are uncertainties out there, and no one, no 18 issuer wants to be the test case. 19 MS. THOMPSON: If I could say one thing 20 quickly on your point of the legal department 21 getting involved. Again, I would just like to read 22 a few comments from some of my counterparts at 23 fairly large public companies and also to your 24 point, Commissioner, that by and large the larger 25 cap companies are pretty comfortable and happy in Diversified Reporting Services, Inc. - (202) 296-9626 30 1 dealing with the rule. Again, these are some quotes 2 I would like to throw out for general discussion 3 because I think they refute that view. 4 But talking about the legal question, and 5 these are not my words, "Because the Regulation does 6 not give guidance on this issue and because each 7 general counsel has his or her own interpretation, 8 many IR professionals have been told not to 9 communicate in ways that before the Regulation would 10 have helped keep information flowing. Some have 11 stopped meeting one-on-one with investors, even if 12 earnings are not discussed. While opening up 13 conference calls may have been a positive outcome, I 14 think the overall result has been a decrease in 15 quality and quantity of communication with 16 investors." 17 This is a second viewpoint: "One of the 18 unfortunate consequences in Reg FD is that it has 19 shifted some of the communications impetus to legal, 20 away from investor relations. Although, legal 21 always reviewed investor presentations before Reg 22 FD, today I find legal wanting input as to the 23 actual meeting program I proposed with veto power 24 being given on certain meetings and presentations." 25 That, to me, says that people are being Diversified Reporting Services, Inc. - (202) 296-9626 31 1 muzzled in a sense. 2 And turning then just for a moment, 3 again, these are not all my words. This is relative 4 to earnings guidance: "We cannot contact an analyst 5 who has not updated their numbers on the services," 6 the first call services, "or who is way out of line 7 on the numbers, because we would get caught on Reg 8 FD. Nor can we ask the services to eliminate all 9 estimates, because they will not do that as long as 10 the brokerage analysts are providing earnings 11 estimates. We also now have an issue with the sell 12 side not updating numbers and they leave their 13 not-updated numbers on the public services and then 14 have their own internal numbers that they share with 15 the buy side." So the public numbers are wrong, but 16 they don't update them because they say it is too 17 much trouble. 18 Again, "We were doing a good job opening 19 up conference calls using the Reg and encouraging 20 management to meet with shareholders and analysts 21 more often." 22 To your point, we had a good disclosure 23 policy, and I think we want to say that. 24 "We were issuing press releases for 25 material information and having conference calls Diversified Reporting Services, Inc. - (202) 296-9626 32 1 when big news items hit. Reg FD came in with a way 2 too broad brush and killed the normal give and take 3 of information about how things are going in the 4 business. Why is it wrong for a company to have a 5 dialogue with investors who care enough to ask about 6 current operations? The rule has put a total chill 7 on conversations; in fact, they are now in the 8 freezer. I think this raises serious policy 9 questions, as these folks are the owners of the 10 company. I still think it is absurd for any company 11 to discuss the analysts' outlook that is based on 12 the analysts' faulty premises. Why does it do the 13 market good to have such faulty ideas out there 14 until earnings announcements are made?" 15 All those quotes came from large cap 16 companies. 17 MR. HUBER: If I can just follow-up on a 18 few of those comments, because I think she is 19 raising a very important question that does apply to 20 big companies and small and mid-cap companies as 21 well; that is, the idea of how to conduct 22 one-on-ones, and the idea of how you give the 23 quality of information that companies, I think, want 24 to give, and the analysts surely want to get, into 25 this marketplace in an FD kind of world. Diversified Reporting Services, Inc. - (202) 296-9626 33 1 In the survey that we did, the lawyers' 2 survey, the biggest decline in anything in the 3 impressions that was sought, was the decline in 4 one-on-ones, going from, for the most part, people 5 were doing one-on-ones. 77 percent of the 6 responses, believe that most of their clients have 7 conducted one-on one meetings with analysts. 8 Post-FD the number decreased to 27 percent. 9 One-on-ones have suffered, and I think if 10 you talk to the analysts, if you do a study on 11 analysts, analysts like to ask those questions in 12 one-on-one kind of things that really show that they 13 have done their homework. 14 CHAIRMAN UNGER: I think Bina is talking 15 about something much bigger than that. I think she 16 is talking about the ongoing dialogue the issuer has 17 with its shareholders. 18 One of my concerns was that the web was 19 allowing people to provide more information over the 20 Internet to individual investors, and they were 21 demanding more information and the companies didn't 22 mind providing it. 23 So I wonder how FD has changed that 24 philosophy of free exchange of information. Some 25 people seem to think that companies don't want Diversified Reporting Services, Inc. - (202) 296-9626 34 1 anyone to have the information, but what you say is 2 contrary to that, and it is really more of a concern 3 about legal liability that is holding back the flow 4 of information, not the desire of the issuer to make 5 this information available to all investors. 6 MS. THOMPSON: That's right. 7 CHAIRMAN UNGER: So I wonder if you 8 could maybe pinpoint exactly what it is -- "exactly" 9 may not be possible since those are not your words 10 -- maybe what some of the biggest concerns about FD 11 are? 12 MS. THOMPSON: Fear of ogre. Fear of 13 prosecution, enforcement. 14 MR. BECKER: Let me ask you both a 15 question that can help us evaluate what it is we 16 hear from everybody. We are getting a lot of 17 extremely anecdotal information, and I don't know 18 what we should make of it. 19 Bina, you read quotations from four or 20 five people. I don't know whether there are four or 21 five people out there that might say something else 22 from the same community or what the proportion is. 23 John, you talk about a study that was 24 responded to by 62 lawyers, giving information about 25 what they are hearing from their clients. What Diversified Reporting Services, Inc. - (202) 296-9626 35 1 should we, as a regulator, make of these things? 2 What is the type of evidence that should 3 have a significant impact on how the Commission 4 looks at this? 5 MR. HUBER: Let me just respond about 6 the study. 62 lawyers does not the American Bar 7 Association make. It is not something that I think 8 is statistically pure. The concepts here are all 9 anecdotal. 10 I share the commendation for the 11 Commission to actually have this six months after 12 the rule. It is a major rule that affects every 13 public company 24 hours a day, seven days a week. 14 For the most part, what you are going to hear from 15 all of us is anecdotal. We are still adjusting and 16 experiencing. 17 But I think what Bina was talking about 18 is that there already is this concern with respect 19 to, and I am going to put it, on an anecdotal basis 20 I have seen it as well, the quality question. And 21 the quality question comes in, as I was trying to 22 say before, on the one-on-ones, on the interplay and 23 the background, that sort of thing. 24 And that's really where, I think, one of 25 the big pressure points come in on FD, is not the Diversified Reporting Services, Inc. - (202) 296-9626 36 1 earnings calls, but rather how do you get through 2 the quarter kind of approach. That, I think, is 3 something that I would ask that the panel here, from 4 the standpoint of both big companies and little 5 companies, how do you get through the quarter once 6 you finish that conference call? 7 CHAIRMAN UNGER: In fact, I think Doug 8 talked a little bit about the one-on-ones. And one 9 of the follow-up questions I have -- and I don't 10 want to cut off anyone to have the commentators 11 comment, I really want to hear from the people on 12 the panel because they are here to give their own 13 anecdotes, and that's what it is all about. 14 But you were mentioning that you still 15 have one-on-ones and there were lots of things that 16 could be discussed in the context of those 17 one-on-ones, which seems to contradict a little bit 18 with what this side of the table is saying. So I 19 was wondering if maybe you could share with us, what 20 can you talk about? 21 MR. LUSK: If the purpose of the meeting 22 is to discuss how the quarter is going, quite 23 frankly, I am not sure we would even set up the 24 meeting. 25 We are there, and we use our executives Diversified Reporting Services, Inc. - (202) 296-9626 37 1 to help educate both the sell side and the buy side. 2 We are a very complicated business and we are doing 3 lots of different things, new businesses, et cetera. 4 We have given our best shot at the beginning of the 5 quarter about our expectations, how business is 6 going to be. And, as I said, we give them an update 7 now after we are through. 8 You know, an analyst walks into the 9 meeting with our CFO or someone else and says, "I 10 want to get some more insight on the quarter," it is 11 not going to happen. And I think they know that. 12 They are going to want to talk about 13 probably road maps, how sales are overseas, maybe 14 the various geographies, some of the trends that are 15 going on over there and what success we are having 16 in expanding, for instance, the communications 17 business, et cetera. 18 As I said earlier, we have a lot to talk 19 about and yet, believe me, the analysts still want 20 to have those one-on-ones, even though they know 21 they are not going to get any useful information in 22 terms of how the quarter is progressing. In fact, I 23 think what is going to happen is the analysts are 24 going to go out and have to do their job, which is 25 sort of dig around, talk to mother-board suppliers Diversified Reporting Services, Inc. - (202) 296-9626 38 1 in Taiwan or whatever and try to figure out what is 2 going on in the PC market, et cetera, that way, 3 rather than trying to rely on a tidbit of 4 information from our CFO. 5 COMMISSIONER HUNT: I couldn't agree 6 with you more. I thought that was precisely what 7 was going to happen when we promulgated FD, that the 8 analysts were just going to have to work harder and 9 do their job, and not just sit around and have 10 conversations with the CFO and say, "I've got the 11 scoop." 12 So if it is having that effect, I am 13 personally delighted. 14 Are the lawyers being too conservative, 15 Mr. Huber, do you think? 16 MR. HUBER: I don't think the lawyers 17 are being too conservative. I think, Commissioner, 18 during any period when a rule starts to take effect 19 that there is a transition period where lawyers see 20 how things work to begin with, and then based on 21 that experience, more and more, shall we say, things 22 are acceptable. 23 From my standpoint, one of the things 24 that the Commission should be commended about is 25 having the division of corporate finance interpret Diversified Reporting Services, Inc. - (202) 296-9626 39 1 things and issue Q&As on interpretations. That 2 helps. But the fact of the matter is, from my 3 standpoint, things like publication, dissemination 4 and all questions of notice should be less rigorous 5 and more flexible, because, as a number of people 6 have said on the panel, getting information is what 7 they are about and they shouldn't be penalized for 8 good-faith efforts to get that information out. 9 MR. SHEDLARZ: From Pfizer, we have not 10 curtailed the interface with the business community. 11 It has always been robust. I think the nature of 12 our operational earnings press release is one of the 13 vehicles that allows us to do that on an ongoing 14 basis. 15 Going beyond this, make no doubt about 16 it, this takes a lot of discipline, a lot of 17 practice, and it takes a lot of hard work and time 18 on the part of senior executives to be well aware of 19 what is in the public domain and what is not in the 20 public domain. 21 So I agree with John, the cost in terms 22 of compliance is not necessarily the initial cost of 23 setting things up, it is more on an ongoing basis to 24 have the infrastructure and the discipline and take 25 the time to speak on behalf of the company and be Diversified Reporting Services, Inc. - (202) 296-9626 40 1 well aware of the facts. 2 I can imagine that companies somewhat far 3 afield of these are in some difficulty in getting 4 themselves up to speed, either not having the 5 infrastructure or not practicing in this fashion for 6 some time. I am sympathetic to that, especially 7 with the regulation that does have some gray areas, 8 and in terms of people who have not practiced in 9 this fashion. 10 But at Pfizer, the robustness, the 11 frequency of the communications with the analyst 12 community have not ceased. And in certain respects, 13 they do more homework before they come in to speak 14 to you, especially in these volatile capital market 15 conditions. It is probably a natural consequence. 16 CHAIRMAN UNGER: Do the IR people see a 17 benefit to investors? I mean, are they getting more 18 information? Do the benefits outweigh the burden? 19 MR. BEDARD: I would like to address 20 that, if I could. 21 As a personal investor in a high-tech 22 business and an individual who has been with a 23 high-tech company for 17 years, last fall, quite 24 frankly, I was disappointed to learn how companies 25 hid behind the umbrella of Reg FD. Diversified Reporting Services, Inc. - (202) 296-9626 41 1 At a time when I thought the industry 2 should be leading the information flow, the default 3 was, "Let's stay protected. Let's say less." And I 4 felt that was a real disservice to the individual 5 investor, whose company should fill him in, and, in 6 fact, we had this umbrella to protect ourselves. 7 Number two, I am not sure I agree with 8 the rest of the panel or not, I can't quite tell 9 where everybody sits, but the practical application 10 of this is that not every audience wants the same 11 type of information. It is becoming a real 12 nightmare to try and manage the conference call or 13 webcast that addresses every single audience that is 14 out there. 15 As an example, the international press 16 wants something completely different than the 17 national business press or the national product- 18 related press, even different than the local press. 19 The local governmental officials want something 20 different than the national governmental officials. 21 So to try and push this all into one meeting has 22 been, again, I think, a real disservice which has 23 created even more post-conference and webcast calls 24 with the information professionals put in a 25 situation where they have to decide, "Okay, am I Diversified Reporting Services, Inc. - (202) 296-9626 42 1 raising more information now because this person 2 wants something more specific?" 3 So, to me, what Reg FD has done, it has 4 created an environment where now the information 5 professionals do not take the lead. They feel they 6 are on an island now where they have to decide every 7 single phone call they take, "Where am I, and have I 8 just said something where now I must go and issue a 9 release?" 10 So as a default, I think we tend to hold 11 back and not take the lead in providing information. 12 MS. PEARSON: In order to answer that, 13 do the benefits outweigh the burden, I think 14 individual investors and all investors definitely 15 enjoy their benefits from getting information. 16 But to your point, Kipp, on the quality 17 of information, you do find yourself editing out 18 certain data points or glossing over others 19 designing an announcement. And one thing that 20 wasn't on Bina's list that I would add to that as a 21 risk factor, from my corporate communications 22 standpoint, is that perception is reality, and if 23 the perception is that investors or analysts are not 24 going to get as good information with Reg FD that 25 they did prior to, what it is doing is it is Diversified Reporting Services, Inc. - (202) 296-9626 43 1 throwing them in the arms of the absolute worst 2 spokesperson for good communication about your 3 shares, i.e., a random salesperson for that company. 4 So what we are having happen is sell side 5 analysts might just unearth a random salesperson and 6 ask them how the quarter is or ask them how margins 7 are, or "Hey, did you do much golfing this quarter?" 8 Anything they can do to get a pulse on the quarter. 9 And that elevates volatility. 10 Or sell side might do a survey of 50 11 people and say it represents our whole business, and 12 it is erroneous data based on a subset of the world, 13 whereas if they asked the corporate office, we could 14 give them a much more thoughtful answer. 15 So the perception of reality of Reg FD 16 means corporations might be clamming up; therefore, 17 go find a random employee and have them spill their 18 guts. And it is one of our ongoing biggest 19 challenges is how to train our salespeople, "Don't 20 talk to investors about the company, send them to 21 us." 22 MR. HANN: I would agree with some of 23 Kipp's comments, I believe. 24 I am of the opinion the average press 25 release is now much longer and more detailed, and Diversified Reporting Services, Inc. - (202) 296-9626 44 1 speaking as purely a shareholder, trying to separate 2 the wheat from the chaff in some of these releases 3 is very, very difficult as a shareholder. 4 And then when analysts go to talk to the 5 investment relations people, oftentimes they are 6 merely referred back to the press release, because 7 you don't want to embellish beyond what is in that 8 release, so I think there has been a chilling effect 9 in terms of those relationships with analysts. And 10 as an individual shareholder, I am not sure what has 11 really trickled down to that person has been 12 beneficial. 13 MS. THOMPSON: I want to get back to the 14 point of, I think, a good investor relations program 15 has always been a good disclosure policy, if that 16 was there and was always there. 17 And I think there is this perception that 18 everybody is running around whispering selectively 19 to analysts. I mean, we weren't doing that. We had 20 good disclosure practices in place. 21 To the individual investors, I think if 22 you polled most companies who do webcasts, you will 23 find that they maybe have 250 people on their 24 webcasts at a photo conference call, if that. 25 Probably half of them are actually professional Diversified Reporting Services, Inc. - (202) 296-9626 45 1 investors and another quarter are company employees. 2 So the individuals, that's why we like individual 3 shareholders, they don't care about the quarter. 4 They care about the longer term, they care about the 5 strategy, they are long-term stockholders. 6 So to try to get them involved in this 7 quarterly focus is doing everybody a disservice, in 8 a sense. And they don't care. They don't listen to 9 the calls. 10 CHAIRMAN UNGER: I guess there are two 11 categories of information here we can talk about. 12 One is the earnings management and confirmation 13 process, and the other is general corporate 14 information. 15 Is that the case? Is there some 16 information that is more freely flowing as a result 17 of FD or is it all being curtailed? 18 MR. BEDARD: To me, there is one common 19 theme here, and that is how many data points 20 represent something significant. And with Reg FD 21 basically what has happened is you are less 22 comfortable in a free and open discussion about the 23 first data point because you don't know for sure 24 does that lead to three and four, now we have a new 25 trend we need to talk about. Diversified Reporting Services, Inc. - (202) 296-9626 46 1 So what you have is maybe the information 2 is the same but the timing of the information is now 3 different, which makes it of less quality to the 4 user. It is either way too early, and you say, 5 "Here is this bead of information, you don't know 6 what it means, you guys go figure it out." Or you 7 wait until you absolutely know that that information 8 has now changed and so then you press release it, 9 but then that's way behind the curve. 10 So I think when you say where you are 11 headed, there is a common theme and it has to do 12 with the timing and how that timing represents the 13 quality of information that you are trying to get 14 out. 15 COMMISSIONER HUNT: So you are not just 16 putting out statements on quarter earnings, I hope. 17 MR. BEDARD: No. That is exactly the 18 point, whether it is business trends or earnings, it 19 has those same beads because businesses change all 20 the time, and our challenge, as communication 21 professionals, is when is it enough information that 22 internally, as officers of the company, you want to 23 go and change the perceptions in the market. 24 And, basically, Reg FD has kept us a 25 little bit more tight to the chest, which you have Diversified Reporting Services, Inc. - (202) 296-9626 47 1 allowed, and not addressed any of the other 2 information providers unrelated to corporations, 3 they can put out any information at any point in 4 time. And that puts us in the back seat, trying to 5 respond to information that may or may not be 6 accurate. And now we have to make decisions, okay, 7 do we address this particular rumor or new data 8 point that for some unrelated purpose was put out 9 there or do we sit back and wait? 10 COMMISSIONER HUNT: And you think FD 11 has hampered you in your usual pre-FD response to 12 that kind of data? 13 MR. BEDARD: Well, it is never just one 14 data point that makes you decide, "This is enough of 15 a data point, I am going to go change my direction 16 of business." It is usually several, so when is it 17 in that line of several that you make that decision? 18 And now you are asking us to say to each 19 individual audience that is out there, "We now 20 believe we have enough information to change what it 21 is we are telling you." That is a very difficult 22 position to be in, versus prior to Reg FD, you were 23 at least more comfortable to be able to just chat 24 free-form about what it could mean, "Well, we are 25 not sure, this is the first time we have seen it, Diversified Reporting Services, Inc. - (202) 296-9626 48 1 but to the extent there is some similarity, past 2 business practices may be it will go here, we have 3 also seen it go here," at least we could help people 4 try to interpret the data. 5 Today it is more difficult to do that, 6 because you either want to release it and say, "We 7 have no responsibility for what it means," or you 8 go, "I am going to wait, wait, wait until I 9 absolutely know what it means," and by then, it is 10 typically old and outdated. 11 CHAIRMAN UNGER: So is that a result of 12 the fact that we are now making sense of the 13 information or confirming the data point to a much 14 larger audience? 15 What exactly is it that restrains you? 16 MR. BEDARD: Why is it a bigger 17 challenge? 18 CHAIRMAN UNGER: Yes. 19 MR. BEDARD: It is probably a 20 combination of everything I heard today. In some 21 cases, you have the attorneys breathing down your 22 neck, saying "Now, be careful if you say anything 23 different than what the last public comment was," so 24 you are a little bit apprehensive there. 25 Number two, you have the press maybe who Diversified Reporting Services, Inc. - (202) 296-9626 49 1 wants to grab the very first piece of data that 2 might be changing, "What do you think of it?" 3 I can't say, "Sorry, my attorney is 4 saying now I have to wait until I absolutely know it 5 is true." So you have this push-pull here and 6 practical application makes it very difficult. 7 MR. HUBER: At the risk of defending 8 attorneys, since I am one, it is not just the 9 attorneys, it is the rule. 10 I agree with a large amount of what Kipp 11 says, aside from saying it is the attorneys. A lot 12 of attorneys are wonderful people. 13 CHAIRMAN UNGER: Should we take a poll? 14 MR. HUBER: The point about this rule is 15 if you don't have an adequate publication and you 16 are talking to someone, and you are a senior 17 official talking to an enumerated person, the rule 18 is going to deem whatever you are saying is 19 intentional, that is the first one, if you knew what 20 you were saying when you were saying it. I don't 21 know of very many educated people who would say, 22 "Gee, I didn't mean that," then it is intentional. 23 And if, indeed, it could be considered 24 material, I take Kipp's point one step, two steps, 25 three steps. The three-point conversation, Diversified Reporting Services, Inc. - (202) 296-9626 50 1 particularly in a technology company or any kind of 2 company that people are talking about a product, can 3 result in, "Oh, my goodness, I just gave away 4 something that could be viewed as important." 5 And the mosaic point, Commissioners, I 6 mean, it is best done with 20/20 hindsight, as 7 opposed to, "Gee, what did you say at that meeting," 8 which goes to the question of what the lawyers 9 advise. 10 CHAIRMAN UNGER: But FD only applies to 11 conversations you have with securities 12 professionals. 13 MR. SHEDLARZ: I think part of the 14 problem is that there is in FD a fair amount of gray 15 area, and if you want to take a conservative 16 posture, the lawyer is going to be overbearing in 17 terms of the way which you approach your investment 18 relations activity, and in that particular company, 19 that would be the practice. 20 I think one of the critical things for 21 the SEC is will you be second-guessing good 22 corporate citizens, people who are well-intentioned 23 in terms of what they are trying to communicate. I 24 think if that is done, then the environment will 25 turn quite conservative because I think, given the Diversified Reporting Services, Inc. - (202) 296-9626 51 1 nature and expanse of aspects of Regulation FD, once 2 again, until we see how this is actually practiced 3 by the SEC, which will hopefully be done in a way 4 that is quite even-handed and respectful of the 5 bunches of folks that try to comply with Regulation 6 FD, and if that is done, I think things will work 7 out in time. 8 If it is not, if it is done in a way that 9 puts in jeopardy good corporate citizens, I think 10 you will find quite a different reaction from 11 companies in the investment community. 12 COMMISSIONER HUNT: Let me respond to 13 that, if I may. First of all, at least from my 14 part, and I can only speak for myself, I can't speak 15 for the Chairperson. 16 CHAIRMAN UNGER: Go ahead. 17 COMMISSIONER HUNT: I would like to be 18 very cautious in terms of the way that we enforce 19 this. We did not promulgate this for the purpose of 20 giving the enforcement another arm to use. 21 We promulgated it for an entirely 22 different reason, we tried to establish a level 23 playing field of information for everybody out 24 there. I think we have been very cautious in terms 25 of not trying to leap on the bandwagon of Diversified Reporting Services, Inc. - (202) 296-9626 52 1 enforcement matters right out of the box, which is 2 how people view Regulation FD. 3 I understand that people need time to get 4 accustomed to the new regime and they should be 5 getting accustomed to the new regime without undue 6 fear of the fact of what we are going to try to do. 7 And a follow-up question to what you said 8 is, do you think we should be giving more concrete 9 advice or do you think it is too early for that? 10 CHAIRMAN UNGER: While you think about 11 the answer, I would join Commissioner Hunt's 12 comments, and he does articulate my views on that. 13 In fairness, I think that both David 14 Becker and Dick Walker, who some of you know, I 15 think they have been fairly vocal in their public 16 statements to try to allay some of the concerns that 17 people have. We absolutely don't intend to punish 18 corporate citizens and I think Commissioner Hunt 19 poses a very good question: If the concern about 20 doing what is right is making you not do it at all, 21 how can we give you more comfort about the way to do 22 it right? 23 MR. RUDER: Can I just comment on that? 24 The problem that you have raised with the 25 rule is -- one big problem is the use of the word Diversified Reporting Services, Inc. - (202) 296-9626 53 1 "material." And I think that's what we are talking 2 about here. 3 You are putting corporate America in the 4 decision-making role of having to decide at the time 5 they are making a statement whether what they are 6 saying is material. And the standards for judging 7 materiality, as we all know, are very uncertain. 8 And many lawyers will say to someone, "If the 9 statement is material, it is going to create a lot 10 of problems, so don't make it." 11 And I think the problem that you need to 12 address is whether or not there is some way to 13 address the threshold of materiality for the 14 purposes of this rule that is different than 15 standards in a fraud case. 16 COMMISSIONER HUNT: When we were 17 talking about this rule, we looked at all the 18 standard literature on materiality, the TSC and all 19 the rest of it, and we came at least to a tentative 20 conclusion that we shouldn't. 21 Now, we may be wrong about this, we 22 shouldn't redefine materiality just for this rule. 23 People already knew what materiality meant, what 24 investors want to see before making a decision. 25 Do you think we were wrong in our Diversified Reporting Services, Inc. - (202) 296-9626 54 1 thinking and we should define it for this rule? 2 MR. RUDER: I think you should 3 investigate it. 4 You do know that one of the things you 5 did was to incorporate SAB-99 in this release, so 6 that a staff statement on materiality now has become 7 a Commission statement. And that also raised the 8 boundaries on materiality. 9 I don't have a judgment, except as a 10 former Commission person, I say you should study it 11 and see whether there is something you should do. 12 CHAIRMAN UNGER: Is one of the problems 13 the disconnect, that now we are talking about 14 company officials making the determinations of 15 materiality as they are engaged in dialogue, as 16 opposed to lawyers studying documents filed with the 17 Commission in which they could determine, maybe more 18 objectively, whether it is a material statement? 19 MR. RUDER: But you have a shazam effect 20 in your rule which says the minute it becomes 21 material and you know it is material, now you have 22 24 hours to act. And that puts a big burden on 23 those that are going to decide whether information 24 is material. 25 MR. HUBER: If it was intentional, the Diversified Reporting Services, Inc. - (202) 296-9626 55 1 shazam is you already violated FD unless you had 2 simultaneous publicity of it. 3 Going back to the Commissioner's point, 4 my real comment here is, you are creating a 5 tremendous amount of pressure on people to do 6 exactly what David is talking about with respect to 7 SAB-99 and its synergistic effect with respect to 8 FD. My answer to your question is, as opposed to 9 changing materiality, the incremental approach that 10 I would recommend is take some of the pressure off 11 companies with respect to publication intent and 12 making some statements sort of Safe Harbors in terms 13 of saying, "If you say certain things, it is going 14 to be okay." 15 A lot of the flexibility is not taking 16 prisoners with respect to good-faith attempts at 17 compliance, I think are very important concepts with 18 respect to what the gentleman from Pfizer was 19 talking about, with which I agree. 20 You are trying to encourage this exposure 21 process as opposed to basically saying, "There is a 22 hair trigger here and if you violate that hair 23 trigger, that's a problem." 24 COMMISSIONER HUNT: Well, I am somewhat 25 concerned that in matters of public forum statements Diversified Reporting Services, Inc. - (202) 296-9626 56 1 of staff people and Commission staff, that we don't 2 think this is a hair trigger. There is still some 3 feeling about that, we have to be overly cautious or 4 they are going to get us." And that's very 5 troubling to me because that is not the atmosphere 6 in which this rule was promulgated. 7 CHAIRMAN UNGER: I don't think that is 8 the spirit of the rule. 9 MS. PEARSON: At EMC, they have long 10 trained us, there is no such thing as a complaint 11 without proposing a solution. 12 So we are kind of working through all of 13 these things, and really one potential solution, 14 recognizing the number of newly-public companies, 15 the number of people who have never dealt with 16 global equity markets that are suddenly finding 17 themselves in this world, the number of attorneys 18 who have never had a whole lot of training in this 19 role, that are suddenly the authority. Perhaps it 20 is one of training. 21 I know the New York Stock Exchange does a 22 great job for the listed stocks. I am sure the 23 NASDAQ does as well. Maybe there should be a 24 section on newly-listed companies, "Here is a 25 section on how do you deal with disclosure, and this Diversified Reporting Services, Inc. - (202) 296-9626 57 1 is the best and most proper way. These are best 2 practice guidelines for you." And then, just have 3 the SEC publish best practice guidelines to take out 4 some of the guess work. 5 If you do agree most companies are 6 disclosing information well today. I think we have 7 all read horror stories about a small cap 8 newly-public company that has done something 9 horrifying, giving the investor relations profession 10 a bad name, but let's just maybe put a little 11 training in at the beginning. 12 COMMISSIONER HUNT: I presume that most 13 companies are trying to be good corporate citizens, 14 just like I presume that most companies are trying 15 to put out adequate financial statements. Now my 16 faith in the latter is sometimes shaken, but I do 17 think most corporations are trying to be good 18 corporate citizens, and I really don't want to do 19 anything -- and one of the reasons we are having 20 this session is because we don't want to do anything 21 -- to restrict the free flow of information. 22 If FD is having that effect, then we have 23 to think hard about how to fix it because that's the 24 last thing we want to do, is to hinder the free flow 25 of information. Diversified Reporting Services, Inc. - (202) 296-9626 58 1 CHAIRMAN UNGER: Speaking of free flow 2 of information, I did want to get at least a little 3 feedback from the panelists about how you can 4 disseminate information. 5 What has been the current practice under 6 FD? Has that changed? Can we make it easier to 7 disseminate information without the shazam effect? 8 MR. BEDARD: I guess that's probably the 9 easiest part, make a conference call and put it out 10 on a press release. 11 MR. LUSK: Yes. 12 CHAIRMAN UNGER: Is that the standard 13 practice? 14 MR. LUSK: Yes. 15 MR. BEDARD: Yes. 16 MS. PEARSON: Although that does take an 17 awful lot of preparation, being a realist, and we 18 want free flow and high-tech. The last conference 19 call we had that I got stats, we had 17,000 people 20 listen to it within the first 24 hours. So my world 21 moves real fast, as I am sure Doug's does and 22 Kipp's. 23 But doing a news release, and we move 24 rapidly, but it does add hours into the process, as 25 does webcasting now, which means a slide creation, Diversified Reporting Services, Inc. - (202) 296-9626 59 1 because slide companies want things 24, 48 hours 2 ahead of time sometimes, so that requires more time 3 when you are broadcasting to as many seats as we 4 are. 5 So the other thing I would like, and I 6 think you have done a great job, Laura, and that is 7 using the word "intent" in getting the information 8 out, not strictly mandating news release, period. 9 But recognizing that, we, as communicators, need 10 many, many tools in order to get the information 11 out, and the best way we think, weighs the 12 information size or impact with the tool. Let us 13 balance that and then make it freely available to 14 anyone that is mildly interested. 15 MR. BEDARD: I think that's a great 16 point. The tools that we use are not always 17 conventional. There are lots of different ways to 18 channel information to prevent something from being 19 a disaster. 20 Maybe there is somebody that started a 21 rumor because they want to short your stock, which 22 could devastate the small investors that are 23 particularly the long fliers, and if you could 24 address that without a press release, you could just 25 get it stopped within the first hour or two. Diversified Reporting Services, Inc. - (202) 296-9626 60 1 What you are really asking us to do, or 2 at least what we tend to feel like we are being 3 asked to do, is, "Wait, wait, wait until it gets 4 material enough where then you can address it." I 5 think that is harmful for everybody and creates much 6 more volatility for a lot of stocks, that kind of 7 action. 8 COMMISSIONER HUNT: I have heard, not 9 just here but in other venues, that a lot of people 10 think that Regulation FD has increased the 11 volatility of stocks. 12 It seems to me, and I want to hear what 13 you have to say, that given the time when the FD was 14 promulgated, it is very hard to know or measure what 15 impact it has as opposed to everything else going 16 on. How can you carve it out? 17 MR. BEDARD: It really is a gut feeling. 18 It is hard to measure statistics on what the impact 19 has been. 20 MR. LUSK: Yes, I think it is almost 21 impossible, especially in light of what has happened 22 in the stock market. 23 As long as I have been at Intel, every 24 quarter we have rumors at IR, we are not going to 25 make our expectations, we are going to beat them, Diversified Reporting Services, Inc. - (202) 296-9626 61 1 you know, rumors out there every single quarter. 2 And I am not sure that will ever go away no matter 3 what we do, quite frankly. 4 It is one of those things that is 5 frustrating for us to sit there and watch as we have 6 our expectations posted or we reiterate our 7 expectations, but rumors are out there and we really 8 can't address them. But I am not so sure how you 9 get away from that. I think that is going to happen 10 no matter what. 11 CHAIRMAN UNGER: Didn't Intel have a 12 very dramatic decrease, temporarily -- 13 MR. LUSK: Oh, yeah. 14 CHAIRMAN UNGER: -- at the initial stage 15 of FD? 16 MR. LUSK: Well, that was just a 17 coincidence. As I said, we have been doing this for 18 about five years and on numerous occasions we have 19 had to come out and issue a press release and have a 20 conference call and say, "We aren't going to make 21 our expectation," or "We are going to beat it." And 22 we have had to do that numerous times over the last 23 five years. 24 In fact, the last quarter we had to do 25 that. And it gets out there all at once. There is Diversified Reporting Services, Inc. - (202) 296-9626 62 1 no talking to the analysts and sort of talking them 2 down. It is just all of a sudden there is a press 3 release on the wire after the market closes, "Intel 4 is not going to make its expectations." And often 5 the case is the stock will drop quite dramatically 6 and we have to talk people through it on a 7 conference call. 8 We have done that several times, yes. 9 MR. SHEDLARZ: One of the things that is 10 clear in this volatile capital markets environment 11 is that enhanced disclosure and an environment in 12 which more disclosure is encouraged, is critically 13 important. 14 And I think, as a number of the panelists 15 have highlighted during the discussion, this is not 16 solely, or even in this environment primarily, about 17 earnings and earnings guidance. In many respects, 18 disclosure about non-financial items that would 19 impact both the short and longer-term position of 20 the company becomes critically important in terms of 21 how a company is perceived and how low the capital 22 market is. And that provides probably a more 23 difficult circumstance in terms of making sure that 24 you live within the confines of Regulation FD. 25 Just the nature of disclosure today, we Diversified Reporting Services, Inc. - (202) 296-9626 63 1 can all appreciate less focus solely on the reported 2 financial results of the company and the increasing 3 extent the investors of the company are demanding a 4 better understanding of what drives the company's 5 performance and all the terms disclosed on those 6 items on an ongoing basis. 7 In the case of Pfizer, what is critically 8 important is what is happening with a new product, 9 which may be sitting with the FDA or may be sitting 10 in research and development. There is no bright 11 line test in terms of what is material and what is 12 not material in that regard. It is a fact and 13 circumstance situation which makes it even more 14 difficult to deal with it. 15 So I don't think any of us deny that it 16 is critically important to have broad-based 17 disclosure. I am sure the SEC is well aware of the 18 fact that living under the confines of that 19 Regulation, dealing with both financial information 20 and basic operation information becomes an 21 increasing challenge. 22 CHAIRMAN UNGER: Going back to the point 23 that Kipp mentioned, that is, using a variety of 24 tools to make an ongoing dissemination of 25 information possible, what kinds of tools are you Diversified Reporting Services, Inc. - (202) 296-9626 64 1 talking about? And do you think FD permits you to 2 do this? 3 MR. BEDARD: I guess maybe I have 4 already been one of the more harsh critics today of 5 Reg FD, and I believe the theme that was stated 6 earlier was the right thing to do when you are 7 trying to promote a better flow of information, more 8 timely, more accurate, what we are all trying to 9 accomplish. 10 The fact is in day-to-day operations that 11 is difficult to do now with the attorneys and 12 everyone else putting pressure back on us, "If you 13 don't know for sure, be careful what you say," so 14 there is this tug of war. That being said, first, 15 some of the others, with the Internet today, 16 information flows instantaneously. Even the SEC 17 itself has changed from a guidance standpoint, it 18 normally was two business days to a week; it was 19 five business days when I first started back in 20 1983, then two days for pretty reasonable 21 dissemination of information. Today, literally, you 22 can make an argument that by the time everybody got 23 involved and got on the Internet at work they've now 24 seen all the information throughout the day, so you 25 are really talking about a six or eight-hour period Diversified Reporting Services, Inc. - (202) 296-9626 65 1 -- maybe two or three hours. So information flows 2 fast. 3 So that being said, just issuing a press 4 release might not be the most efficient way to 5 disseminate information. Some people may not have 6 access to that press release, for example. So we 7 have to use a myriad of dissemination tools to get 8 information out there. One by itself is never 9 enough, I have found. 10 MR. HUBER: The point I would add to 11 what Kipp is saying, is one size doesn't fit all, 12 not just in terms of methods of dissemination but in 13 terms of the companies as well. 14 We have companies who will issue a press 15 release and not have it picked up. We have 16 companies that literally can be pounding the door of 17 a service and still not get the information carried 18 through any service. So the rule says "means 19 reasonably designed to disseminate." I guess my 20 point is for the Commission to literally embrace 21 that concept and have more flexibility with respect 22 to the fact that one size doesn't fit all issuers 23 because diversity is good, and not penalize people 24 for a good-faith effort in trying to get the word 25 out. Diversified Reporting Services, Inc. - (202) 296-9626 66 1 COMMISSIONER HUNT: When we promulgated 2 the rule, we were very conscious of the Fortune 5000 3 companies, we weren't worried about the Fortune 500. 4 We were worried about the Fortune 5000 companies 5 make their information available. Means reasonably 6 designed under the circumstances are substantially 7 different for a Fortune 5000 and a Fortune 500. 8 MR. HUBER: I agree. 9 CHAIRMAN UNGER: Does FD prevent you 10 from using all of the tools that are available that 11 would be effective in disseminating information? 12 MS. PEARSON: It may. I know one piece 13 of dialogue that is going around and around in my 14 company, and we have very friendly shareholder 15 attorneys at my company, we love our attorneys, and 16 that is, in essence, if a tree falls in the forest 17 and no one reports on it, did it actually fall? 18 So when we are at an investment 19 conference and we are speaking freely and it is 20 webcast live and it is being posted on EMC's website 21 within nanoseconds, and there are journalists in the 22 room, and we say something that might have the 23 slightest degree of materiality, depending on the 24 subjective nature of the audience, I would rather 25 not issue a news release afterwards. I feel it is Diversified Reporting Services, Inc. - (202) 296-9626 67 1 out there, there were journalists in there, and I 2 would like to say if the journalists felt it was 3 newsworthy, they are feeling "oohs" and "ahs" and 4 whatever in the room, I would like them to report on 5 it or not report on it, but I would like to feel 6 that that was disclosed in an open environment. 7 CHAIRMAN UNGER: Do you not feel that 8 way now? 9 MS. PEARSON: That's the way we have 10 been practicing, but nothing material in neon has 11 been put forward in these type of events. There is 12 a real subjectivity to what is material in this 13 world, as you know. 14 So I am leery on that, I am uncertain. 15 MR. BEDARD: That takes us back to the 16 original point where as long as you have a press 17 release, a webcast and a conference call, you feel 18 protected. Anything else, you have to swing shy for 19 everything, "Should I press release now? I am not 20 quite sure." It is really an awkward situation. 21 COMMISSIONER HUNT: The problem is it 22 is technology driven. There are so many people who 23 have access to one means of communication and not to 24 others, so to cover your bases, I don't know how you 25 get around not using a mixture of media to get the Diversified Reporting Services, Inc. - (202) 296-9626 68 1 information out. 2 MR. BEDARD: I think Polly makes a good 3 point, too. Even in our own business, in our space 4 in the memory business, the type of information that 5 is deemed material at any point in time changes. 6 In some business it might always be 7 earnings related. A lot of times, in ours it is not 8 earnings related, it is mostly that a change in the 9 direction of the stock price elicits a change in the 10 direction of the inventory. Is industry building it 11 or is it shrinking it? And it could be material at 12 one point in time, where another time, it isn't. 13 So I guess that brings me full circle 14 back to trying to put some definition on whether it 15 is material. Wow, this is really tough to address 16 all the different companies -- 17 COMMISSIONER HUNT: It is hard. 18 MR. BEDARD: It is really hard to do. 19 CHAIRMAN UNGER: We have a very strict 20 timetable here. We have about five minutes left on 21 the panel, so I would like to give you all an 22 opportunity to raise something that maybe didn't 23 come up in the course of the conversation, and we 24 will go around the room, and maybe you could mention 25 if you wanted to change one thing about Regulation Diversified Reporting Services, Inc. - (202) 296-9626 69 1 FD, what would it be. 2 Does anybody want to raise any additional 3 points or topics? 4 MS. PEARSON: I guess I could start. I 5 found that every time there has been a change in our 6 industry, like in most industries and every 7 profession, change is hard. 8 I can remember the discussion on whether 9 we should open our con calls, ten years ago, to 10 individual investors and would that open us up for 11 strike suits and all of this sort of thing. And we 12 said, "It is the right thing to do, let's do it." 13 At Safe Harbor time, "Do we really want 14 to publish and make clear all of our bulletins and 15 guidance," again, the same fear. "It is the right 16 thing to do, let's do it." There have always been 17 tough decisions that you face, web-based 18 communications, "Let's do it." 19 So our philosophy is, "Embrace it, don't 20 fear it." And I am thrilled to have what appears to 21 be such an understanding Commission, and just keep 22 that word "intent" there; know that most companies 23 are operating with very, very good intent and do 24 what you can to protect us from overzealous 25 attorneys on the bad side. Diversified Reporting Services, Inc. - (202) 296-9626 70 1 MR. BEDARD: I guess I will go second. 2 Just for record, I love attorneys, my boss is one. 3 That being said, I think the intent of 4 Reg FD is right on the mark. It only encourages all 5 communication professionals to disseminate 6 information on a timely basis and a free-flow type 7 manner, which is what we are all trying to strive 8 for. And if we can somehow eliminate the fear or 9 the impropriety of coming out in one area. All 10 these decisions could somehow eliminate the need for 11 someone to be in a position of feeling like you have 12 to make a decision based on information that is 13 different for everyone. I am not saying that very 14 well. 15 It is a very difficult decision to 16 determine what is material, it is very difficult to 17 know have you reached the actual level of 18 dissemination that is required by Reg FD. And if we 19 can somehow address those issues, then Reg FD will 20 be a lot farther ahead in trying to, I think, get to 21 the goal of why we are all here, which is fair 22 dissemination of information to all audiences in a 23 high-quality and timely manner. 24 MR. HANN: I will go next. I love 25 attorneys, too. Diversified Reporting Services, Inc. - (202) 296-9626 71 1 Once again, I would applaud the 2 Commission for having this forum today. I think it 3 is very helpful and hopefully everybody can tell in 4 the audience that people are struggling, working 5 hard to comply. And I would echo the statements 6 made thus far that anything the Commission can do to 7 improve and widen these safe harbors, I think, would 8 be very, very helpful and ultimately help meet the 9 effectiveness of Reg FD. 10 Thank you. 11 MS. DEMSKI: My comment is with respect 12 to improvements that would be in the area of 13 providing some guidance so that the small cap 14 companies, in particular, that may be new to the 15 public environment would have some guidance provided 16 to them, because even if you were to poll the 17 attorneys -- and I hate to keep bringing up 18 attorneys here, but within the publicly traded 19 companies in biotech in San Diego, there has been a 20 difference in advice from the respective attorneys. 21 And we talk amongst ourselves and compare 22 notes, and there isn't always consistency on how to 23 handle a given situation, so if a best practice form 24 of guidance could be provided, I think that would 25 help to alleviate some of the confusion and also Diversified Reporting Services, Inc. - (202) 296-9626 72 1 some of the apprehension about dealing with this. 2 MR. SHEDLARZ: I am actually still 3 forming my opinion on attorneys after 25 years. 4 I think there is a common theme in what 5 you are hearing here. I think that most folks are 6 good corporate citizens. I think this puts greater 7 onus on folks at a time when you are seeing very 8 volatile markets and, again, an increase in quantity 9 and quality of information on an ongoing basis. 10 I think the way that this is practiced by 11 the SEC in terms of whatever actions they take and 12 whatever flexibility they show, I think sessions 13 like this will make clear to folks that you are not 14 on a mission in terms of industry. 15 I thank the SEC for holding this session 16 and giving us an opportunity to speak on behalf of 17 some of the concerns that we have with regard to 18 Regulation FD. I think the extent to which you can 19 provide some guidelines would be useful. I know 20 that is difficult, but we are dealing with something 21 as expansive as this, cutting to the core of your 22 communications with a broad base of investors, I 23 think wherever you can provide us some Safe Harbors 24 and bright line tests, I think that will continue to 25 allay people's concerns and probably avoid what Diversified Reporting Services, Inc. - (202) 296-9626 73 1 clearly nobody wants, that is, finding that you have 2 a very cautious atmosphere in terms of disclosure. 3 COMMISSIONER HUNT: Well, in thanking