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Holland: New Rules Aimed at Leveling Wall Street Trading Field Causing Some Market Instability

Aired October 23, 2000 - 1:16 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

NATALIE ALLEN, CNN ANCHOR: New rules go into effect on Wall Street today aimed at leveling the trading field between big investors and individuals, the rest of us. If a company lets information slip to an analyst or investor that could influence stock prices, that same information must be made public within 24 hours. In other words, everybody gets to know from here on out.

For more on all of this and what this means to people who invest in the stock market, we're joined by analyst Michael Holland in New York.

Hi, Michael.

MICHAEL HOLLAND, STOCK MARKET ANALYST: Hi, Natalie.

ALLEN: Let's talk about, first of all, how it's worked in the past. There was just a select group of analysts on Wall Street that got the information from companies first, correct?

HOLLAND: Well, that's the targeted group right now. To some extent that was true. I think it's overstated as to how pervasive it was. But in some instances there was no question that was the case.

ALLEN: And how did that help -- did that help stabilize the overall stock market in any way? Why was that the way business was done?

HOLLAND: Well, that's a good question because in a number of instances it actually did help to stabilize prices of companies because information was given out over a period of time and it was filtered.

We have to remember when people talk about those nasty Wall Street people, over half the people viewing who are American citizens own stock right now. So we're all part of this. And in fact, we own mutual funds who are part of this group. And the reality is that a number of people were benefited by the stability on the one hand. On the other hand, there were abuses because companies obviously -- at some points, a few of them gave information to some people before they gave them to others and those people profited from them, and that's wrong.

ALLEN: So from here on out, starting today, everything is different. An investor, an analyst in Montana will have the same information as one on Wall Street, and investors, about a company's earnings?

HOLLAND: For sure. But the reality is that what's happening is that the problem, which we just discussed, the solution may not be exactly the thing that all of us would like to see. Because, in fact, what's going to happen -- what happened the last couple of weeks with the volatility we saw, Natalie, we had companies not giving information until the last minute, so they got it on the wire services to everybody and there were huge negative surprises. So what's happened is the instability you referred to at the outset here is something we're going to have to live with at least during this adjustment period and probably longer, because company management will say, why should I even bother talking to anyone if I could get in trouble even if I don't need to do something wrong?

ALLEN: Right. Some Wall Streeters are saying that this is going to put a chilling effect on the communications between analysts and the companies. And you agree?

HOLLAND: It's already happened, Natalie. It's happened in the last couple of weeks. We've had a preview of coming events here and it's already beginning. So I think it's not a prediction, I think it's an observation.

I think, long term, the intentions are well done on the one hand. We'll see if the solution is actually the right solution. Right now it looks as if it's a mixed possibility.

ALLEN: Michael Holland, we'll wait and see. Thanks so much for joining us.

HOLLAND: Thanks, Natalie.

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