GENERAL MILLS EXECUTIVE OFFICES
Number One General Mills Boulevard, Minneapolis, Minnesota
Elizabeth L. Wittenberg
Telephone: (612) 764-2167
Facsimile: (612) 764-5011
March 27, 2000
Jonathan G. Katz
Securities & Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: Proposed Regulation FD, File No. S7-31-99
Dear Mr. Katz:
I am pleased to comment on behalf of General Mills, Inc. on the Securities and Exchange Commission proposed regulation on issuer disclosure. General Mills is a major packaged consumer foods company which has been incorporated in Delaware since 1928. Our equity securities are listed on the New York Stock Exchange. We share the SEC's desire to foster full and fair disclosure of information by issuers to facilitate the operation of equitable and efficient securities markets. However, we have several specific comments on the proposal:
Chilling of Information Flow. The proposed rules appear to advocate that all investor communications be open to the media and the general public, while at the same time acknowledging that disclosure of immaterial general background information to a limited audience should not subject a company to enforcement action.
We encourage the SEC to make a clear distinction under the rules between prohibited disclosures of material non-public information and permitted disclosures of immaterial detail or background information. Without clearer guidance in this area, we believe the flow of corporate information to the market could be negatively affected.
Currently, many companies hold conference calls with analysts from the large institutional investment and brokerage companies following the issuance of their annual and quarterly earnings press releases. The press release ordinarily describes all the material information; the analysts call is used to respond to technical or specific questions and presumes that participants have a high level of sophistication and are following the particular business or industry. Companies that believe the proposed rules require them to open such analyst calls to the media and the general public face two risks: (i) increased likelihood that less sophisticated participants on the call will misunderstand or take out of context the information they hear and pass that misunderstanding on to others and (ii) the companies may decide to avoid covering technical points altogether on an open call by discussing them in follow-up one-on-one conversations -increasing the opportunity for selective disclosure.
There is also the possibility that media representatives, looking for a "scoop," but not well versed in an industry's jargon or way of doing business, may create "news" where there is none, misleading investors along the way.
The purpose of routine analysts conference calls (i.e., following the release of annual or quarterly results) is to provide detailed, technical information to sophisticated followers of the company's stock. They are not "news" events. To the extent a company has material information to disclose, we wholeheartedly endorse the use of a press release to widely disseminate the information. Nevertheless, the SEC should make clear that presentations and conference calls that contain no material information should be allowed to remain private, focused communication sessions targeted to a uniformly sophisticated and knowledgeable financial audience. If this sort of communication is not clearly protected in the new rules, fear of enforcement action could lead companies to open these routine analyst sessions to all comers, diluting the effectiveness of these investor communications. These focused conference calls with analysts provide an efficient way to answer common questions once, and are far more effective in avoiding the potential for selective disclosure than existed in the days of responding to telephone calls on an individual basis.
"Prompt" Public Disclosure of Non-Intentional Disclosure and Mechanism for Public Disclosure
The staff requested comment on whether 24 hours is the appropriate length of time in which to make a public disclosure of a non-intentional disclosure and on the proper avenue for disclosure. Given the challenges of international travel, the number of people who may need to be consulted on a question of materiality, and the time it takes to prepare and review a filing or press release, our view is that 24 hours may be inadequate.
Broadest dissemination of information is also served through disclosure via EDGAR which is available 24 hours a day, 7 days a week rather than by a press release. Therefore we favor public disclosure of non-intentionally disclosed information within not more than 2 business days via EDGAR.
Addition of Item 10 to Form 8-K. The staff has requested comment on whether issuers should be permitted to make disclosures required by Regulation FD under Item 5 of Form 8-K as an alternative to disclosure on proposed new Item 10. We favor disclosure under Item 5. In instances where the materiality of a non-intentional disclosure is not clear, many issuers will wish to err on the side of disclosure. By using Item 5 of Form 8-K, issuers serve the public interest in making information available to the broadest audience without necessarily conceding that an unintentional disclosure of material information has occurred. Companies will be far more likely to make disclosure under Item 5.
Thank you for the opportunity to comment on this proposal.
Very truly yours,
Elizabeth L. Wittenberg
cc: Ivy S. Bernhardson,
Vice President, Secretary