Seek quality information in your interest

WHILE concepts such as order execution and routing practices implicate the structure of the market, quality information is its lifeblood.

Without it, investor confidence erodes. Liquidity dries up. Fair and efficient markets cease to exist.

As the quantity of information increases exponentially through the Internet and other technology, the quality of that information must be an unwavering priority.

High-quality information begins with a high-quality financial reporting process. There is no question that US' reporting system has been, and remains, the highest in the world. But in recent years, the dramatic transformation of the accounting industry has been marked by a rise in the types of non-audit services firms provide. As a result, auditors who provide consulting services for their audit clients are now under heightened and sometimes conflicting pressures, which may result in a compromised audit to protect a more lucrative consulting contract. With so much at stake -- the confidence of America's investors -- one simply cannot afford to allow any doubt to settle in over the integrity of the numbers.

Two weeks ago, the SEC passed new rules that will help guarantee that the integrity of US' financial information remains second to none. The rules identify certain non-audit services that, if provided to an audit client, would impair an auditor's independence.

In addition, the rules require disclosure of fees by firms that offer IT consulting services to their audit clients, thus, allowing investors to decide for themselves if a firm's practices are in line with public interest. And audit committees will now disclose whether they considered the types of non-audit services performed and the fees involved.

High quality information, however, can only sustain enduring public trust if it is dispersed in a manner that is timely, comprehensive, and openly available to the public. Plainly put, when important financial information travels only to a privileged few, or when that information is used to profit at the expense of the investing public, or when it comes by way of favoured access rather than by acumen, insight, or diligence, we must ask, ``Whose interest is really being served?''

If investors see a stock's price change dramatically, but are given access to critical market-moving information only much later, we risk nothing less than the public's faith and confidence in US' capital markets.

That is why the SEC recently adopted Regulation FD, for fair disclosure. Today, when companies disclose material, non-public information, they must disseminate this information broadly. If, for instance, corporate officers wish to inform Wall Street analysts that the company may not make its upcoming quarterly earnings estimate, this same information must be simultaneously disclosed to the public, through a press release or other comparable avenue.

(Source: www.sec.gov)