Thursday, August 07, 2008

More on the SEC Witch Hunt Fallout

Nicholas Yulico writes in about a topic first discussed by CJR's Audit column a few weeks ago -- how the SEC's frenzy to track down rumors about brokerages has cut off the free flow of negative information between analysts and journalists.

The problem is not short-sellers, it's the perception of short-sellers. They are viewed by common folk and unscrupulous public company CEOs as the monsters hiding under the bed. Their fangs are wicked and sharp, and all they care about is profiting off other people's pain, or so the foolish theory goes.

In reality, any reasonable person would agree that short-sellers perform an essential service, since they add to the efficiency of the stock market.

As a journalist, being able to tap into these investors' minds is a luxury that the average retail investor doesn't have. Instead, many retail investors are forced to listen to the endlessly bullish forecasts offered by public company CEOs and the sell-side analysts who brown-nose with them.

This is good news for CEOs who have something to hide, but terrible for the public's right to know.

© 2008 Gary Weiss. All rights reserved.

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