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Georgia Bard

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Georgia Bard

Re: None

Thursday, 11/23/2000 2:06:20 PM

Thursday, November 23, 2000 2:06:20 PM

Post# of 484
The SEC Friend or Foe? Part 2

Mr. Levitt appears to be determined to demand and expect this quote by Mark Twain for all information that is published before the public eye, "Honesty is the best policy - when there is money in it."

In his efforts to educate the public, Chairman Levitt was the essence behind creating the Office of Investor Education and Assistance http://www.sec.gov/oiea1.htm. Plus, he has been on a campaign to take his agenda to the public in a series of investor town hall meetings in a forthright attempt to assist and educate investors about how to use common sense should they decide to participate in the markets.

Additionally, Levitt was the idealist behind creating the SEC’s website, http://www.sec.gov/ and an 800 number (800-SEC-0330), which allows the public free and easy access to historical documentation. These websites enable the public to report problems and request educational documents at no cost. The ease of a complaint for example is a simple process, just fill out the form at http://www.sec.gov/consumer/compform.htm

Mr. Levitt’s efforts have assisted many small investors to become more cognizant rather than being totally ignorant unless that is the way they wish to remain. From his speeches and tracking his efforts, I would have to say this proverb would best fit his market theme, “Ignorance isn’t bliss, it’s a costly death kiss!” Whereas, Mr. Levitt also simplified the classic Pump & Dump with, "Buy – Lie – Sell High!" However, a lot of small investors are hoping in the future Mr. Levitt will address Short Sell High – Lie – Buy! Time will tell if this comes under SEC’s scrutiny, since shorting is far more synonymous with lying. One reason it is easy to get sells because of fear stimulation, thus facts do not have to be a part of the underlying basis, just pure conjecture.

One of the most notable accomplishments of Mr. Levitt, while Chair of the SEC, is every due diligence investor's favorite website for DD information site, EDGAR (Electronic Data Gathering, Analysis, and Retrieval).

Now EDGAR was started in the fall of 1994, when the SEC announced the implementation of required Financial Data Schedules that would be furnished and filed on EDGAR in connection with certain electronic filings processed by the Divisions of Corporation Finance or Investment Management. There are two sites for EDGAR http://www.edgar-online.com/ and http://www.freeedgar.com/ plus search features on the SEC’s home page for non EDGAR http://www.sec.gov/cgi-bin/txt-srch-sec and EDGAR documents http://www.sec.gov/edaux/searches.htm.

For those that did not know it EDGAR is a public company on the NASDAQ market under the ticker or symbol of EDGR. One has to wonder if this is the new "Roll Call" type scenario, where the value of the information (the pen) is going to make another unique and profitable investment. EDGR's revenues stem from subscription rates and payments from their partnerships with 300 different Web sites that pay to feature their information, like analysts and so forth. Though some of the information is free to the public such as 8Ks, 10Qs, 10ks, etc. other filing documents such as 144s cost the small investor money. I have a free account, which is limited to the available information, but for roughly $9.00 a month, I can get real time information at a cost per document.

Another very useful section of the Sec website is the Daily Digests, which displays the daily S8, SB, and 8K filings among other data http://www.sec.gov/news/newsindx.htm. This is a great site for daily DD. The good thing about this site is that there is no cost for the summary of information contained within the daily digests.

This official website http://www.sec.gov/ and http://www.edgar-online.com have become the underlying basis for any critical thinking investor with common sense to start their due diligence with the required public information. Previous filings since 1994 roughly or the beginning of a company’s compliance can be located with minimal effort. This provides a solid resource for the historical path a particular company has taken to where it is today. Thus conjecture does not have to play a role in an individual’s investment decision unless an investor prefers the ranting of Internet postings as their source for DD information.

During Mr. Levitt’s reign as Chairman, there have been approximately 177 Final rules posted on the SEC website along with the 139 Proposals, as of this report. Some of the proposals do not have finals yet. However, a lot of the proposals that did pass dealt specifically with disclosure in the various industry areas. The rest of the final and proposed rule changes dealt with various other items of the market also. Wars, conflicts and controversies have most likely erupted on my top 25 accomplishments (non-inclusive) since Mr. Levitt took office:

1. Added representatives of investors and others from outside the securities industry to the board of the NASD. (More could be done to take the fox out of the hen house)

2. Convinced the municipal-bond industry to accept a ban on most campaign contributions.

3. Created a commission to prevent conflicts of interest at accounting firms that also engage in management consulting.

4. Sought and won accounting standards for derivatives.

5. Helped put more representatives of investors on the board of the Financial Accounting Foundation.

6. Encouraged the use of alternatives to traditional securities-underwriting methods.

7. Convinced the NYSE to ease its rules (Rule 500) for delisting securities.

8. Oversaw the move to securities pricing based on decimals.

9. Adopted anti-manipulation rules concerning securities offerings for corporate mergers and acquisitions (Regulation M)

10. Adopted amendments to Rule 504 of Regulation D to curb fraudulent secondary transactions

11. Adopted rules for Privacy of Consumer Financial Information concerning brokers, dealers, and investment companies, as well as to investment advisers that are registered with the Commission. (Regulation S-P)

12. Created Year 2000 Operational Capability Requirements for Registered Broker-Dealers and Transfer Agents.

13. Adopted comprehensive revisions to the procedural rules for Fair and Efficient Administrative Proceedings. (Rules of Practice)

14. Adopted privacy rules promulgated under section 504 of the Gramm-Leach-Bliley Act for the Privacy of Consumer Financial Information (Regulation S-P)

15. Brought about amendments to restrict the use of Form S-8 for the offer and sale of securities concerning off shore plus promoters, consultants and advisors (A test of this would be OTC:BB ECNC’s numerous S8 filings, which includes: offshore, consultants, promoters and advisors)

16. OTC derivatives available only to entities that engage in dealer activities in eligible over-the-counter derivative instruments and meet certain financial responsibility and other requirements.

17. Delegation of authority to cancel registration of certain Investment Advisers.

18. Electronic Filing by Investment Advisers; Amendments to Form ADV to provide investors with a readily accessible database of information about investment advisers and persons associated with investment advisers

19. Rules concerning custody of Investment Company Assets outside the United States, which an investment company can protect its assets while maintaining them with a foreign securities depository.

20. Adoption of Amendments to the Intermarket Trading System Plan To Expand the ITS/Computer Assisted Execution System Linkage to all Listed Securities.

21. Brought about other disclosures such as: Segment Reporting Financial Disclosure, International Disclosure Standards, Delivery of Disclosure Documents to Households, Audit Committee Disclosure, Financial Statements and Periodic Reports for Related Issuers and Guarantors, Delivery of Proxy Statements and Information Statements to Households plus amendments to Rule 9b-1 Options Disclosure Document.

22. Unlisted Trading Privileges (Rule 12f-2) an IPO issue will be permitted to begin trading immediately after the first trade in the security is reported by the listing exchange to the Consolidated Tape.

23. Exemption from Section 101(c)(1) of the Electronic Signatures in Global and National Commerce Act for Registered Investment Companies.

24. Amendments to the Commission's Freedom of Information and Privacy Act Rules and Confidential Treatment Rule 83.

25 Regulation FD, the general rule regarding Selective Disclosure is probably the most recognized and controversal accomplishment. For a layman’s understanding of the new regulation FD, the best FAQ I found is on the Gray Cary Ware & Freidenrich LLP’s article describing the now level playing field for all investors, brokers, analysts and financial world as a whole. http://www.gcwf.com/articles/sec/sec_sum00_1.html

Whereas, the new rule also requires an issuer that unintentionally discloses material nonpublic information has to make public disclosure of the same information within 24 hours. Public disclosure is defined as filing a Form 8-K with the SEC, or issuing a press release to a "widely circulated news or wire service" or at a publicly accessible forum, such as a press conference. The SEC will also allow companies to issue a release on a corporate Web site; however, it is not considered a replacement for either of the first two options.

Thus the small investors screams and the will of the people was successful. Also it was expected Regulation FD has drawn criticism from brokerages, analysts, and financial-services sectors, plus companies that make their money from confidentially disclosed information, the "Big Money" in the market. Can Levitt fight with these big boys and players as the small investor’s advocate for a level playing field? I would say, yes indeed, according his resourcefulness as described in Accounting Wars of Business week. http://www.cob.vt.edu/accounting/faculty/jyardley/ftp/acct4415/BusinessWeek.html

Dad gum it, I guess the big money and analysts are going to have to come to the chat rooms to read between the lines of diligent investors who are deemed to possess knowledge about the company and maybe familiar with possible material events to get the inside scoop. Hmmm … To me that seems to be a possible role reversal, where professional analysts could be in search of due diligence from laborious unlicensed want-a-be online analysts or stock gurus!

Could the Regulation FD so many small investors cried out for be a REVELATION? I believe this recent event is best summed up in Ambrose Bierce (1842-1914) "The Devil's Dictionary" quote in 1911, ”The revealing is done by the commentators, who know nothing.

Hey just my opinion and I could be wrong!

To be continued…

Gary Swancey



:=) Gary Swancey

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