Matt Levine: evaluation

Transcript context

…What’s a rule that should be amended or appealed? What’s a rule that should be amended or appealed? I should always be prepared for these things. I don’t know. What’s a rule that should be amended? Let me give a weird one. This is not an answer to your question. But I’ve been thinking a lot recently about Regulation FD, which is the rule that says that companies can’t disclose material nonpublic information to one investor unless they’ve simultaneously disclosed it to all of their investors. Seems like a very straightforward fairness rule. The weird aspect of it is that companies meet constantly with their investors, and their investors are very excited to meet with them and want research analysts to set up these meetings. There’s a whole economy of these meetings, and yet they’re never disclosing material nonpublic information. Then the investors leave those meetings and go trade. It’s like, “Well, they didn’t learn anything in those meetings.” It’s a striking set of facts. What I think is striking about it is that it’s clearly how the world should work, that companies should talk to the people who own them. And those people should be able to ask questions and propose and say, “Hey, you should really be doing this,” and then watch the executives’ reactions. Yet at the same time, the law says you can’t do it. I don’t know how I would amend it. But I think that there is a tension between the existence of this rule that on its face you would think would prohibit substantive meetings between companies and their investors, and the lived practice of finance in which companies meet with their investors, and have investor relations departments, and are owned by those investors, and have fiduciary duties to those investors. It’d be strange if they never met with them. But it’s also strange that they do meet with them because this rule exists that you would think would cast a shadow on those meetings. Next question. Yes, all the way in the back, next to last row on this side.…

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