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Subcommittee Plans Fair-Disclosure Review

The U.S. House Financial Services subcommittee on capital markets, insurance and government-sponsored enterprises, chaired by Rep. Richard Baker (R-La.), will review securities-disclosure rules this year, Baker announced last month. Among those to be reviewed will be the "Regulation Fair Disclosure" that the Securities and Exchange Commission adopted last year.

The subcommittee will examine whether the fair disclosure rule is having its desired effect of promoting access to information for all investors or whether it is leading to less disclosure, said Baker.

"The purpose of the review is to send a signal to those who would exploit or circumvent laws with the intent to defraud investors," said Baker. Baker suspects that some companies are circumventing the law by not disclosing any information.

The fair disclosure regulation was adopted in order to end the practice of companies disclosing information only to a select group of analysts. Under the regulation, companies that intentionally issue information to a select audience must also release that information to the general public. Critics of the rule have argued that all investors in general may get less information since companies may keep quiet between quarterly earnings releases. There is not a specific timetable for the review of the regulation but it will not begin for at least three months, said a spokesperson for Baker.

Among the first issues the subcommittee will consider, is legislation that reduces the amount of fees imposed by the SEC for the registration and trading of securities. Also, the subcommittee will examine whether new mutual fund disclosure rules go far enough to simplify information about funds concerning taxes, fees, results, and risks and whether fund holding disclosure needs to be more frequent and more accessible, said Baker.