CNBC has posted an unofficial transcript of Andrew Ross Sorkin’s recent interview with SEC Chair Jay Clayton. While much of the interview covers ground familiar from the last couple of days regarding forward-looking disclosure, particularly the joint statement that Clayton released with Corp Fin Director Bill Hinman (see this PubCo post), Clayton’s interview does provide some helpful color.
First, Clayton reiterated his message that investors are not quite so interested in historical information this quarter; instead, they are “thirsting for” information about where “companies stand in light of the shut-in? [shut-down?] How are they operating under the current conditions? And what do they see for the future under current conditions? And then, a path to recovery that is consistent with our health—our decision to put health and safety first. And that’s what investors want to know.” Referring to a previous guest who had discussed changing production and changing capital expenditures, Clayton confirmed that “[t]hat’s exactly the kind of information that investors are thirsting for.” With regard to a communication from another CEO who had walked through various potential scenarios for the economy and the impact on the company, including the possibility of suspending the company’s dividend if the crisis were prolonged, Clayton spoke approvingly: “[c]ommunicating to your shareholders how you see the company performing under different scenarios, and then what that means for your capital structure, your liquidity position and your capital needs, that’s the kind of communication.”
Clayton also expressed concerns about leaking and speculation. To the extent that companies will need new capital, Clayton encouraged companies to disclose where they stand and limit speculation going forward. And “with respect to things like financing, you know, possible changes in operations, material changes in the way you do your business, practice good corporate hygiene. Announce them as soon as you can. And before you’re able to announce them, keep that information as tight as possible.” “Good hygiene” is also Clayton’s recommendation for all marketplace participants, as hedge funds, professional investors and others scramble for information about drug trials and therapeutics to address the health crisis, leaving retail investors at a disadvantage: although the SEC’s framework is designed to disseminate information to investors “as fairly as possible,” the SEC doesn’t “want to deter them [the professional investors]. You know, we want capital to flow into places where it’s going to do the best in responding to this health care crisis. But I just ask everybody in the marketplace, particularly around public companies, to practice good hygiene. It’s very, very important.”
When asked about buybacks and dividends in this environment, Clayton did not respond to the question about whether, in light of the challenging optics, he would encourage companies to continue their buyback programs during this crisis. In his view, a company’s debt-to-equity ratio and decision about continuation of dividends (and presumably buybacks) was “a company-specific decision.” He noted, however, that a number of the large banks did announce that “they were going to suspend buybacks during this period and preserve that capital. You know, communicate. And then tell people why you’re making that decision. Investors want to know why.”