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Circling Wagons on Disclosure, Wells Fargo Ends Conference Calls

A few weeks ago the Securities and Exchange Commission proposed a tough new set of rules to pressure companies into sharing key information more widely with investors.

Now Wells Fargo (WFC), the nation's seventh-largest bank, has responded to the SEC's push in what some consider a bizarre manner: It's going to stop holding conference calls to discuss earnings.

Two people who listened to the bank's Tuesday earnings call say that in place of conference calls, Wells will provide more detailed financial press statements and release to the public messages recorded by top executives. The bank didn't comment when asked for more details. The move highlights just what a tricky task regulators face in encouraging a freer, more equitable flow of information that keeps all investors on the same footing.

Surprise, Surprise

During its Tuesday call with analysts to discuss fourth-quarter earnings, Wells announced plans to nix such events in a move aimed at ensuring compliance with the SEC's proposed disclosure rules, according to Joe Morford, a banks analyst at Dain Rauscher in San Francisco, and an East Coast hedge fund manager who requested anonymity. Both listened to the call. (Morford rates Wells a strong buy and his firm has done no underwriting for the bank, while the fund manager is short Wells' shares.)

In contrast to most other banks, Wells' earnings calls have been closed to the press and the wider public. The SEC, whose proposed rules are in a public comment period set to end in mid-March, wants to make it possible for anyone to listen to these calls. Conference calls are considered extremely valuable because they provide an excellent opportunity for analysts and investors to quiz companies' top managers.

"The SEC's staff would be disappointed that a company is cutting back on its talk with analysts," says Stuart Freedman, a securities lawyer with Schulte Roth & Zabel, a New York-based law firm that hasn't done any work for Wells. "Analysts can ask pointed questions and ferret out important information during conference calls." The SEC declined to comment.

"This is a really odd move. In my opinion, it's a step backwards," says Mark Coker, president of, an online directory of earnings calls and company events. The bank probably wants to compensate for the conference call by giving out extra information in the press release, Coker says. But he adds: "Will Wells Fargo be able to anticipate every analyst question in the press release? I doubt it."

Cutting Both Ways

Coker says more expansive disclosure helps companies get their message across to investors. Conversely, firms that release less information risk having their stock become more rumor-driven.

And there's the school of thought that says those who don't willingly provide this information may have something to hide. The hedge fund manager who requested anonymity says Wells may be ending the calls now because it's about to start releasing disappointing financial results.

But Dain Rauscher's Morford isn't too bothered by the prospect of no more calls by Wells. "We need to see how it goes, but at this point it's not necessarily bad," the analyst says. He adds that "most of the important information comes in the management's overview," which he now expects to be included on the phone message or in the press release.

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