Date: 03/29/2000 10:51 AM Subject: comments: Selective Disclosure and Insider Trading Jonathan G. Katz Secretary Securities and Exchange Commission 450 Fifth Street NW Washington DC 20549-0609 Dear Mr. Katz: Thank you for soliciting public comment on proposed amendments to 17 CFR Parts 230, 240, 243, and 249 on Selective Disclosure and Insider Trading. I offer these comments on behalf of the National Federation of Press Women, a national organization of women and men in various fields of communications. The organization supports broad access to public information and endeavors through its educational efforts to encourage members of the press and public to protect the right to know. With respect to your inquiry about the breadth of public disclosures, I argue in support of three main channels of information: the broadly disseminated press release, the mainstream wire services and legal notices. I believe all three have a role to play in the Commission's mission. We applaud the SEC's focus upon problems of selective disclosure. Because America has become a nation of equities traders through the burgeoning growth of 401(k), Keough and IRA plans, nearly half of America's households now own stock. Families who once relied upon stock brokers to advise and trade for them now manage their own portfolios over the Internet. In light of this new populist investor era, the stability and fairness of the public markets are of urgent and broad concern. We agree that public companies must have the obligation to immediately and publicly disseminate material information to a broad and mass audience when events that trigger the insider rules have occurred. We do not take a position upon the events that may trigger a disclosure nor upon the Commission filings required. Our comments are directed to Section 5, Definition of Public Disclosure. As a recently retired publisher of a small daily newspaper in Kansas, I appreciate the sensitivity of the Commission to the need for broad reach into media markets. The Commission might be surprised by the channels through which many Americans gather information today. Some, certainly, do so through the Internet. But I believe it is an ancillary source for most, used primarily to obtain greater detail than mass media may provide. For first-notice news, some people rely upon local broadcasting or cable channels. Some may pick up the news only through drive-time radio. But most people in Abilene, Kansas, rely upon the Reflector-Chronicle, which covers business news of interest to people in Abilene. We would hope that the Commission will remember the importance of the local press and the important role of professional communicators as it considers the breadth of this rule. Let me imagine how a public company in my area might handle a public disclosure obligation and how the Chronicle might assist in the public education mission. Since the general markets of interest to citizens of Abilene may range as far east as Kansas City and as far south as Wichita and as far west as Colorado, it is easy to imagine a host of stories about material events affecting businesses in our area that would be of interest to our readers. It requires no stretch of the imagination to guess that many Abilene citizens who invest in equities may be more likely to invest in companies they know, the ones here in Kansas. It's also fair to assume that many of our readers need help in understanding the impact of business developments. That doesn't mean they will take whatever the Chronicle offers without question. Many, surely, can analyze a balance sheet on a company's website. But the less sophisticated would rely upon journalists to provide the first impression of what an announcement means and whether it is generally favorable or unfavorable to a company's outlook--and the journalists rely upon the professional assistance of public relations and public information officers whose job is to get the word out in intelligible fashion. The entire chain of information, however, depends upon a triggering disclosure. How, as a busy editor in Kansas, might I be informed? Would I have the time to peruse the websites of a dozen or more companies on a daily, or even weekly, basis? Not likely. Would I have a large staff of reporters with the time to do so? Certainly not. Would I be able to discern which companies might maintain an email notification list, and which lists I might request, so that I would be told of a new posting on a website? The possibility of full coverage of all options is remote. Would I go to a press conference? If it were within reasonable distance, probably. But how would I find out about the conference? Can I imagine a circumstance when a company with unfavorable news would organize a press conference in a large hall, for purposes of satisfying the disclosure rule, but selectively invite only a few interested business reporters and analysts? Yes, I can imagine that. Bad news is not shouted from the rooftops. The question, then, is which notification avenue is likely to reach me, prompt me to assign a reporter to look into the story, and produce the information most likely to be used by the citizens of Abilene? I can identify three important channels. One, a press release would catch my attention. But it will have to be broadly disseminated to be of value. The fact is, however, that successful companies know very well how to achieve such breadth. Many NFPW members work in public relations departments or for firms whose speciality is to see to it that important news reaches the necessary outlets. They fill an important function in our democracy, because they have the nose for news and the ability to tell a complex story in simple terms. They know how to tell good news for maximum impact and bad news with a degree of ethical candor that maintains public trust. Journalists know how to objectively use the information these specialists provide--and the public relations people know how to support news gathering to their best advantage. In my experience, successful companies maintain wide, viable press lists to announce their good news. Knowing the capability for broad disclosures of good news, the SEC would not be unreasonable to require a company to use the same networks and lists to make their required disclosures. A good test of the adequacy would be to require a best efforts disclosure and, if closer examination is needed, to compare the list used for the disclosure to that used for the company's latest product or service announcement. Two, the Associated Press would reach most local news outlets. Most small newspapers do not subscriber to Reuters or the financial wires. The AP remains the backbone of news in this country--and its networks are critical for both local newspapers and local broadcasters. From the wire, the newsroom would spot a local lead and we would investigate further. Three--via a channel that may not have occurred to the Commission--an inexpensive legal notice in a newspaper of record in that company's home area would also reach a broad audience. A good many newspapers now post these notices on their own websites, which many readers watch closely. Also, a notice in the legal columns of a newspaper also is likely to trigger a story by the newsroom if the event is one worthy of public discussion. The legal notice is a time-honored mechanism for advising the interested public of important disclosures. Even in the dawn of the Internet, the need for independent publications of important disclosures will remain. We urge the Commission to include this channel as a viable option. The Commission inquires whether disclosure on a company's website should be a factor in the discharge of the obligation. Certainly the Internet has a role to play here. But the question is not whether the public yet has adequate technology to utilize the Web. The question is whether an Internet posting is sufficiently active to equal the impact of active news delivery into the home and workplace. The website is a passive tool. The channels I recommend above are active, pro-disclosure mechanisms. We believe that the Commission's final rule should require disclosures that are: 1) in print, 2) available not only in financial media, but in the local press and 3) at least as widely disseminated as the company's most recent advertising and promotion announcements. If the Commission follows these general principles, it will serve not only the interests of the financial analysts and specialists who most closely follow your work. It will also serve the interests of the citizen, the most important investor. We appreciate the opportunity to speak. Sincerely, Vivien Sadowski President National Federation of Press Women PO Box 5556 Arlington, VA 22205 or at my home office: Abilene Reflector Chronicle PO Box 8 Abilene, KS 67410 (785) 263-1697