Federal regulators should intervene if companies do not reveal their derivatives holdings willingly, according to a study released by the Federal Reserve Bank of Chicago.

"The need for such regulations has to be based on the belief that market discipline is not adequate to force firms to disclose this information voluntarily," Chicago Fed economists James T. Moser and Subu Venkataraman wrote in the October Fed Letter.

The authors said firms could omit information that would divulge long- range investment plans. Regulators also should ask investors what information they would find most useful, they said.

The two Fed economists also said any rule must ensure that the disclosures are accurate and unbiased.

Making reporting requirements voluntary can be ineffective as senior management often releases good news promptly while burying bad news, they said.

The Securities and Exchange Commission and the Financial Accounting Standards Board are both considering rules that would require all corporations to reveal their derivatives holdings.

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