SAN FRANCISCO - In a sign that the Securities and Exchange Commission may have a struggle on its hands as it seeks to open up disclosure policies among U.S. corporations, Wells Fargo & Co. has called an end to quarterly investor conference calls, citing the SEC's proposals as the reason.
The San Francisco-based banking company discontinued the calls "to ensure we continue to comply with SEC disclosure requirements," spokesman Larry Haeg said Monday. Wells Fargo is mulling other methods of issuing earnings information, including prerecorded messages from senior executives, Mr. Haeg said.
Observers said Wells' decision may be just the first of many adverse reactions to the SEC's proposal, issued in December, dealing with so-called selective disclosure. SEC Chairman Arthur Levitt has been vocal in opposing the practice, in which companies communicate nonpublic information to analysts and institutional investors but not to the public at large.
"We do not believe that allowing issuers to disclose material information selectively to analysts is in the best interests of investors or the securities markets generally," the SEC said in the proposal.
The proposal would require companies to disclose all information widely, rather than just to select parties. It would also require companies to make "prompt public disclosure" of material information unintentionally disclosed to a narrow audience.
Prompt public disclosure could be defined as issuing a press release, said SEC spokesman Chris Ullman. When asked whether ending live conference calls was an intended consequence of the proposal, Mr. Ullman declined to comment.
But observers worried about unintended effects that could extend well beyond conference calls. For example, when analysts garner new information in one-on-one meetings with bank executives - one of the primary reasons analysts meet with bankers - the SEC proposal feasibly could require the company to immediately disseminate the information to the general public. Sutro & Co. analyst Campbell K. Chaney said this could have a chilling effect on communications between banks and Wall Street.
"What if I walk over to Wells Fargo and they tell me something that hasn't been published?" Mr. Chaney asked. "Do they have to put out a press release on it? That is so cumbersome that it could lead to no communication whatsoever.
"This proposal could change a lot of things, and none of it for the better," he added.
Wall Street predictably panned the discontinuation of the conference calls and said it was especially problematic coming from Wells Fargo, an acquisitive company that has been consolidating a variety of operations. Its conference call is important opportunity for analysts and the company to address complicated topics that can best be cleared up via question-and-answer sessions, said Nancy A. Bush, an analyst with Ryan, Beck & Co. in Livingston, N.J.
"There are an enormous numbers of questions generated, so this of all times doesn't seem like a good one to make a move like this," Ms. Bush said. "I'm not sure I understand Wells Fargo's rationale."
Several banking companies, including Wachovia Corp. of Winston-Salem, N.C., have historically offered only phone-in playbacks of senior executives when quarterly earnings reports are issued. Others, such as U.S. Bancorp in Minneapolis, offer only a press release.
Wells Fargo, whose decision to end quarterly conference calls was first reported Friday by TheStreet.com, is probably concerned that opening its conference call to all investors would have lead to unsophisticated callers misinterpreting complicated financial information, Mr. Chaney said. But that argument falls short, he added.
"You may get an unsophisticated investor on the line now and again, but Wells Fargo is a big enough company that its call should be open to everyone," Mr. Chaney said. "They could just cut the call off after 60 minutes if they are worried that they would get too long."
Some analysts said that the move might hold an advantage to investors. Joseph K. Morford, an analyst with Dain Rauscher Wessels in San Francisco who was on Wells Fargo's conference call last week, said he expects the banking company to provide more detailed earnings press releases to compensate for the lack of quarterly question-and-answer sessions.
"At the end of the day, I don't expect this to mean they will cut back on the information they give out," Mr. Morford said.
