Dan Good, head of the merger department at E. F. Hutton:
Rumors are a much larger problem now than in the past, primarily because you have greater merger and acquisition activity and more arbitrageurs professional investors following issues. That and all the loose talk on Wall Street contributes to these problems. I wouldn't be surprised if the SEC made an example of some major firm to try and discipline the Street in 1986.
Harvey Pitt, partner in the Washington office of Fried, Frank, Harris, Shriver & Jacobson; former SEC general counsel:
People shouldn't expect the SEC to do the impossible. What the commission is witnessing is the product of the market's own evolution. At least part of the problem is that this is a marketplace in which anything can happen. Small companies make bids for larger companies. We have a very hot market.
George Bermant, attorney with Gibson, Dunn & Crutcher:
I don't know what you do about pure rumor trading. I don't think there is an easy solution. Bounties paying tipsters may be fine. I somehow question whether they will get results. I think everybody has got a feeling about where these rumors start, but you can't prove it.
William Lilley III, senior vice president, CBS Inc.
Very few companies have been afflicted by rumors as we were for a year. At least a dozen companies at different points in time were merging with us. The glamor of the company and the fact that it had become a media event made us more susceptible to this kind of rumor play. There needs to be an example made of a speculator caught and punished for rumor planting.
Ira Lee Sorkin, SEC New York regional administrator:
I think the answer is going to have to come from the companies. When a corporation sees its stock either rising rapidly or going down rapidly, and it cannot be traced to anything but rumors, I think corporations are going to have to seriously consider making announcements and being accurate in their announcements.
Stephen Hammerman, executive vice president of Merrill Lynch and former New York regional administrator for the SEC:
You had a situation with Texaco-Pennzoil where somebody started a rumor that there was going to be a merger. Bingo. Somebody made a buck on that. It also shows you how volatile the markets are.
SEC briefing paper mailed to merger experts who will meet here Wednesday to discuss problem of rumors:
During the past several months, there have been a number of instances in which rumors regarding corporate mergers have resulted in substantial increases in the price and trading activity of the securities of certain issuers. In some instances, the circumstances suggest that material nonpublic information may have been leaked to persons who traded on the information.
In other situations, rumors turned out to be false, which suggests that they may have been planted or circulated by persons seeking to profit from the misinformation. The leaks and rumors resulted in large-scale trading volatility, which may undermine pubic trust in the integrity of the securities markets.