Mike Kelly bought stock in Thermo Electron around $40. From April to October 1998, the stock plummeted to $12, costing the Mason investor a bundle — all because Wall Street insiders knew more about the company's problems than he did.

        “If I'd known earlier that there was something going on with that, I could have done something personally,” he said. “But I wasn't privy to that information.”

Arthur Levitt

        A new federal regulation that goes into effect Monday is designed to make sure that never happens again. Regulation Fair Disclosure (Reg FD) bans companies from releasing only certain information to certain people — called selective disclosure — even if that means companies ultimately clam up altogether.

        If they tell one of us, they must tell all of us.

        “Regulation FD will bring all investors, regardless of the size of their holdings, into the information loop — where they belong,” said Arthur Levitt, chairman of the Securities and Exchange Commission.

        What would have been logistically difficult in the past is now possible — or at least feasible — with technology. America's publicly traded companies already have been releasing more information than ever through open conference calls and posting financial information on World Wide Web sites.

        Take Covington's Ashland Inc. The oil and specialty chemical company has specific procedures when it releases news such as quarterly earnings. When the information is released on news wires, the company immediately posts the information on its Web site and distributes the information to interested publications.

        “We like to think we've been in compliance,” said Stan Lampe, Ashland spokesman. “We don't find the fair disclosure regulation onerous at all. From our viewpoint it treats everybody on an even footing.”

        The majority of U.S. companies — 61 percent of 2,500 surveyed by the National Investor Relations Institute (NIRI) — already broadcast their earnings and conference calls with analysts over their Web sites. Another 23 percent plan to go to Web-casting by the end of the year.

        Clear Channel Communications, Inc., a San Antonio, Texas, company that owns eight radio stations and one television station in Cincinnati, will make better use of traditional corporate communication tools to keep investors informed.

        “What we will be doing is utilizing more press releases, more conference calls open to general public and utilizing more SEC filings for public disclosure,” said Randy Palmer, vice president of investor relations.

        “That's the key: anything we're discussing that could be viewed as material information such as acquisitions, divestitures and guidance as regards to earnings — we want full disclosure to the general public.”

        A week before the SEC approved Reg FD on Aug. 10, a NIRI survey showed that the rule would have no significant effect on the communications of 43 percent of companies. Nine percent of companies said it would significantly affect their practices. The remainder said they would cut back or eliminate some practices.

        The rule came about because of another story similar to Mr. Kelly's. Abercrombie & Fitch, a retailer based in the Columbus area, was accused a year ago of tipping some Wall Street analysts that third-quarter sales were slowing.

        Institutional investors included in that inner circle were able to sell on that Friday, Oct. 8, for as high as $39.75 a share, leaving the rest of the country to learn of the bad news after the price had already dropped to $32.50. When the news was announced publicly Oct. 13, a wider sell-off dropped the price as low as $15.93 3/4 before the week was out.

        “Joe Average investor is always left holding the bag on the bad news,” said Jeff Kerstine, analyst at Haberer Registered Investment Advisors in Cincinnati. “The information should have been disseminated to everyone equally.”

        Reg FD ups the ante, however, by actually limiting the information exchange between company executives and Wall Street analysts. It requires that when an executive discloses any material information, it must also either file government paperwork, issue a press release via news wires, or post it on the Web site.

        Even if the information slips out over a golf game, the company has 24 hours to tell everyone.

        And that's why some investment professionals have been critical of the rule — fearing that instead of more information to the public, Reg FD will result in less information to the analysts.

        And everyone knowing less could make a more volatile stock market.

        “If a company becomes much more cautious, then blurts out an announcement through a press release, the reaction from the market could be much more intense,” Mr. Kerstine said.

        Lou Thompson, president and CEO of the NIRI, said that if companies cannot help guide analysts estimating a company's earnings — even through winks and nods — then the estimates will be farther off of reality.

        With earnings being the backbone of stock price valuations, all investors could be headed for a bumpier road.

        “And the last thing we need now is more volatility,” Mr. Thompson said.

        So, unsure of how broadly the regulation will be applied, some public companies in Greater Cincinnati and across the country are scrutinizing their public disclosure policies.

        “We've had to think more closely about what we say and to whom,” said Dawn Bertsche, vice president and chief financial officer at Multi-Color Corp.

        She said the Cincinnati consumer label printing company will be more careful about the information it presents to investment analyst groups to be sure it doesn't disclose something that hasn't been previously released publicly.

        In the past, she said analyst presentations have been very informal. “We'll have to be a lot more cautious about the information we disclose,” she said.

        Steve Warshaw, president and chief operating officer of Cincinnati's Chiquita Brands International Inc., said that his and many other companies will be cautious, waiting for others to draw the line on how much to disclose and when.

        “We've always given very serious consideration to rules about selective disclosure,” he said. “We've been extremely careful for years.”

        NIRI's Mr. Thompson said that at worst, Reg FD is unconstitutional by limiting free speech. At best — as he saw at a recent seminar for financial officers on how the new rule would be implemented — the caution from companies like Chiquita and Multi-Color will simply make them clam up.

        “Some people came away with the idea that less is better,” Mr. Thompson said. “Fair disclosure may not be full disclosure, at least in the short term.”

        Mike Boyer, Cliff Peale, John Eckberg and Lisa Biank Fasig of the Enquirer business staff contributed to this report.

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