The Securities and Exchange Commission is preparing a proposal that could give individual investors access to pre-IPO roadshows that are typically attended only by analysts and institutional investors.
Commissioner Laura Unger confirmed Thursday that the staff is drawing up a proposal, to be submitted in March or April, that would broaden access to IPO roadshows, or the presentations companies give to analysts and institutional investors.
The proposal could help individual investors by further discouraging selective disclosure, whereby institutions and larger investors typically receive key information ahead of retail investors. But regulators and industry observers emphasize the delicacy of the issue, suggesting it's possible that such a rule might ultimately stem the flow of information to all investors, which would fly in the face of the agency's intentions.
individual investors the most information to make as informed a decision as possible seems to be in the investor's and public's best interest," says Scott Ryles, president and CEO of
, a new investment bank formed by
and others. "It's an attempt to democratize access to relevant information in making an investment decision."
The proposal follows a series of letters from the agency stating that more open roadshows don't violate securities laws. Those letters included one issued to Charles Schwab last November that allowed the brokerage firm to open up Internet roadshows to certain retail customers. Roadshows have been accessible to analysts and institutional investors on the Net through such sites as
"Basically they're codifying a series of no-action letters regarding roadshows, and we've been supportive of those," says Margaret Draper, assistant vice president of corporate communications for the
Securities Industry Association
But Commissioner Unger says that while she hasn't yet seen a draft of the proposal, "the issue of roadshows has been a difficult one" for the SEC. "If roadshows are to be made widely available to all investors, we should avoid the creation of two roadshows: the regular roadshow where institutional investors can get earnings projects and elicit material information, and a sanitized 'roadshow lite' for retail investors," she said in a speech last month.
Unger is also concerned that the "filtering" done by analysts may change. "If we make all the information available to everyone, do we lose something in this filtering function that the analyst plays?"
The SEC has been split on the issue. "There's one part of the SEC that would like to roll back the clock, and there's another part that seems to be forward-looking and recognizing that technology is a great way to provide more information to investors in a responsible and reasonable way," says a person familiar with the agency.
And the roadshow question touches on larger issues of selective disclosure, or releasing information to some investors and not others.
"The commission is recognizing that they can't simultaneously be against selective disclosure in other contexts and then say you can make selective disclosure to investors in the IPO context," says John Coffee, a securities law professor at
The SIA's Draper says that a move to force companies to disclose information to everyone may have negative results. "We're afraid companies will clam up, and stop talking to analysts with the fear that what they say to one they'll say to others, and that they'll just stop talking," he says.
But some say that recent events like the
IPO, which was delayed in October following a
about information provided in the roadshow that wasn't in the prospectus, necessitate a change of policy.
The Webvan IPO "is exactly why the same information should be available to everybody, and the Net gives you a perfect vehicle to do that," says Sandy Robertson, partner with
and founder of