Reg FD: Not-So-Full Disclosure

Some companies may be providing more earnings information to investors because of Regulation FD, but the controversial new rule isn't making all of them fess up, according to a survey released today by the National Investor Relations Institute (NIRI).

Twenty-four percent of companies are actually providing less information following the enactment of Regulation FD, or Fair Disclosure, according to the survey conducted of 577 companies by NIRI, a trade group for investment relations professionals.

Reg FD was enacted by the Securities and Exchange Commission last October to prevent companies from secretly guiding down earnings estimates by leaking bad news to analysts or favored shareholders ahead of earnings reports. Many analysts believe Regulation FD has a lot to do with the exceptional number of earnings warnings the Street has seen in recent months (for our story on the trend, click here).

Critics of the new regulation warned that it could lead to companies clamming up altogether, rather than risk running afoul of the new regulation, and that appears to have been happening in some cases.

"Earnings guidance has become a risky area," making some companies reluctant to share much information, says NIRI president and CEO Louis Thompson. This reluctance is a concern that NIRI will further investigate, Thompson says.

The survey also showed that 79% of companies are continuing to hold one-on-one meetings with analysts. But Thomson says these meetings are to discuss information that has already been released to the public. "The SEC had said that if Regulation FD diminished one-on-one meetings, then they would have made a mistake," he says.

The survey also indicated that analysts have become gun-shy about asking companies to review their earnings models. Prior to Reg FD, 81% of companies reviewed analysts' draft earnings models, while now only 53% do, according to the survey.

The survey did show, though, that 28% of companies are now providing more earnings information to investors, while 48% are providing the same amount. Public access to earnings conference calls has also risen to 89% of companies surveyed, from 60% before Reg FD's enactment.

Also, 79% of companies are providing earnings guidance, with 56% of them updating this guidance, according to the survey (the survey did not ask respondents whether they were providing earnings guidance prior to Reg FD).