January 31, 2005
Creating a new category of well-known seasoned issuers that are exempt from gun-jumping provisions is unjustified and unwise. The purpose of the federal securities laws is to ensure a fair and honest market. No one wants to risk losing money in a game where they do not know the rules. A well-informed market results in correct prices, and therefore promotes market productivity by justifying investors trust and confidence in the market. Without this trust and confidence, there would be no market. There is no justification for the correlation the SEC makes between wealthy companies and a lack of market conditioning during the quiet period. Just because a company is successful and wealthy today does not mean they will continue to be so tomorrow. Yet the exemption gives those well-known seasoned issuers an artificial competitive edge by precluding any negative information that may come to light during the quiet period about the company, just as it may for any other company. It does away with a potential quality-checking mechanism. Giving the most economically powerful companies permission to rest on their laurels by exempting them from existing gun-jumping requirements does not make sense in an industry where the stocks traded have no intrinsic value but what the companies work to make it. Essentially, the freedom that well-known seasoned issuers would have from gun-jumping regulations say to the investor, Trust us. Look at how wealthy we are. One might argue that this category merely recognizes what is going on in the marketplace today. This may be true, but the fact that it is happening now and many people are doing it is no justification for such drastic and unnecessary action. There is nothing to justify equating wealth with honesty and honesty with wealth, as Enron and WorldCom have recently proved.
The entire purpose of the federal securities laws is to ensure a fair playing field, and the method by which it does this is to ensure trading based on correct information in an unconditioned market. It seems the SEC is actually conditioning the market indefinitely by putting their stamp of approval on certain issuers. These issuers would be able to say, the SEC thinks we are good enough to warrant special treatment. We are exempt from certain provisions, we can make offers while other companies cant. It is bad policy and undermines confidence and trust in the market by asking investors to go on trust alone. Investors may feel they are missing out on information what developments were missed because the process was cut short? The SEC would be taking too big a hand in regulating the markets if this new category is approved. It would confer an unfair advantage by precluding or hindering existing investors options during quiet time, thereby making their choices for them or narrowing the courses of action available to them. In this age of Enrons, WorldComs and concerns about ever-growing monopolies, we should be seeing regulations that seek to ensure fair play even more, not ones that actively skew it.