The name of Richard L. Franyo, an executive committee member of Alex. Brown Inc., was spelled incorrectly in Washington Business yesterday.
When privately held firms sell stock to the public, they are required by the Securities and Exchange Commission to disclose details about how much stock their biggest inside shareholders own.
But key differences in the information disclosed recently by Baltimore's Alex. Brown Inc. and T. Rowe Price Associates Inc. illustrate that the SEC's rules and policies do not always lead to full disclosure of insiders' holdings. While T. Rowe Price's SEC filings name the largest inside shareholders who are active in the firm's management, Alex. Brown instead stated that Alex. Brown Partners, a Maryland Limited Partnership, owns 65.2 percent of the firm.
SEC officials explained that Alex. Brown was not required to disclose how much stock individual inside partners have been allocated because "we determined that this was not material for investors, so we didn't force them to make that information public."
Another reason for allowing Alex. Brown to keep the information private, according to SEC officials, is that, technically, "ownership" of the 65.2 percent block of Alex. Brown held by the partnership rests with the partnership, and not with individual partners. But the Alex. Brown prospectus clearly reveals that individual partners have been allocated stock in the firm.
"Under terms of the Alex. Brown Partners Partnership Agreement, no partner is deemed the beneficial owner of any shares of the company's common stock owned by the partnership," Alex. Brown's prospectus says. "The right to vote and sell all shares resides in the partnership's executive committee. Shares, however, have been allocated . . . to partners for distribution upon their withdrawal from the partnership."
The Alex. Brown prospectus says that members of the partnership's executive committee have been allocated 21.6 percent of the company's stock. While the prospectus does not disclose how much stock each individual has been allocated, it lists the following as members of the executive committee: F. Barton Harvey Jr., Donald B. Hebb Jr., Benjamin H. Griswold, Jack S. Griswold, Joseph R. Hardiman, David J. Callard, James T. Cavanaugh III, Richard L. Frayno, Charles S. Garland Jr., Robert S. Killebrew Jr., Robert G. Merrick Jr. and Truman T. Semans.
In contrast, T. Rowe Price listed its top directors and officers, who will own 33.9 percent of the firm after stock is sold to the public, and also disclosed how much stock each officer owns.
These officers include Thomas H. Broadus Jr., 3.4 percent; George J. Collins, 3.7 percent; L. Gordon Croft, 2.5 percent; James E. Halbkat Jr., 0.1 percent; Carter O. Hoffman, 2.6 percent; Albert C. Hubbard Jr., 3.3 percent; Edward J. Mathias, 3.3 percent; James. S. Riepe, 2.7 percent; George A. Roche, 3.3 percent; Charles H. Salisbury Jr., 2 percent; Edward A. Taber, III, 2.6 percent, and M. David Testa, 3.3 percent.
The only member of this group who is selling some of his stock in the upcoming public offering is Hoffman, who will sell 105,000 shares (about $2.4 million) and retain 179,707 shares, or 2.6 percent.
Ironically, the biggest single block of stock being sold by an individual in T. Rowe Price's offering is owned by a man who no longer is an officer of the firm.
Curran W. Harvey, who retired as president and chief executive officer in 1984, is selling 175,000 shares (about $3.9 million), which will leave him with 2.7 percent of the firm, or 185,362 shares, after the offering.