Lest you harbor quaint notions about the much-touted "leveling" of the investing playing field, consider the little game that was played on it last week with the shares of Hewlett-Packard Co.

If you are a small investor in that company, you received no advance notice of this match.

Be advised, they went ahead without you. Not surprisingly, you probably lost.

What happened, in brief, was this: With the presentation of the Palo Alto, Calif.-based company's quarterly report three weeks away, the Wall Street analysts who cover Hewlett-Packard started calling in for their regular updates from corporate officials early last week.

Those officials told analysts something that made them skittish. The maker of personal computers, printers and servers made no public announcement, however. The rest of the world learned something was up when a big sell-off began late Tuesday. Before the company issued a formal statement, Thursday morning, the stock had plummeted from the high 70s to the mid-60s.

Nothing illegal happened. What HP did is business as usual--and that's the problem. If you don't believe me, check out the recent speech by Securities and Exchange Commission Chairman Arthur Levitt Jr., who called the information flow between companies and Wall Street analysts a "stain" on the markets. Companies coddle analysts to obtain the most favorable coverage, which is critical to their stock price. Analysts covet their access to companies, because special knowledge is the only thing they have to offer clients.

When you read those little phrases in daily market stories--XYZ shares plunged after a conference call with analysts--this is what's been going on.

Indeed, before proceeding further, I should note in fairness to Hewlett-Packard that there have been much worse episodes and that in this instance, at least, the company is willing to talk about it, which many others don't.

The lesson is nonetheless clear: As everyone says ad nauseam, a great deal of information is now available to the ordinary investor nowadays. But don't count on getting it first--or even in time to do anything about it. Many would like to "trade off the news." Few can.

Here's what I've been able to reconstruct about this episode (analysts did not return my phone calls). On Oct. 1, HP chief executive Carleton S. "Carly" Fiorina held a conference call with analysts who cover the company advising them of certain positive and certain negative possibilities for the fiscal fourth-quarter results. To the company's credit, a transcript of the call was posted on the company's Web site that day, where it still remains. And the media were invited to listen in on the call. So, as a shareholder, you could read all about it.

Among the worries mentioned in the call was possible disruption of PC component flow as a result of the earthquake in Taiwan, Marlene Somsak, the company's manager of media and financial relations, told me in a phone interview.

The Wall Street analysts started calling HP again at the beginning of last week. They were trying to get final bits of information before the company went into a "quiet period"--a routine self-imposed silence that starts two weeks before release of each quarterly report, the latest of which is now scheduled for Nov. 17.

The analysts were informed, Somsak told me, that "we do see some disruption in component supply." They were, in her words, "now experiencing" some difficulty, not just "worrying about it."

Now, as far as the company was concerned, this was not a major problem. Nor did the company consider it terribly important news or even new news. "We considered it to be a reiteration of predisclosed business conditions and risks," she said.

Therefore, only the analysts were told.

As it happened, some of the analysts, in particular Steven Milunovich of Merrill Lynch & Co., thought it not so insignificant. He cut earnings estimates for the company by 5 cents, to 73 cents a share. Other analysts turned equally negative.

A nickel, of course, isn't worth a dime anymore, except in the world of analysts and the markets, where it's worth millions.

A 12 percent stock-price plunge, as happened with Hewlett-Packard, is a big deal, too. It set off a frenzy of media and shareholder inquiries. What on earth was going on?

The first reported public comment I noticed was made by Milunovich. "HP appears less comfortable with [previous] analyst estimates based on our conversation with the company," he said in a report to Merrill Lynch investors carried on the Bloomberg News wire.

As the stock tumbled, company officials remained silent until late Wednesday, and then the only explanation was sketchy, provided to wire reporters who called them up looking for a story. A news release followed Thursday morning confirming that the company had some earthquake-related problems.

By then, of course, investors who had not already acted were out of luck, as they were when the company finally issued a formal statement Friday morning.

Investor complaints came pouring in. "I took some phone calls myself," Somsak told me. "People asked what the blank is happening. We certainly do understand their concern."

The online chat rooms where the traders hang out got ugly, too. Most articulate (and printable in a family newspaper) was the complaint from someone calling himself "Ricky Rudedog" at Raging Bull (www.ragingbull.com), the popular hangout of many individual investors.

"It is particularly frustrating to sit by in ignorance" during a sell-off, he wrote. "It appears that significant information is shared with a few select analysts ahead of the general public. These analysts apparently use the early information to reduce their brokerages' and certain clients' exposure to the stock before the individual shareholders knows what is going on. . . . If there is HP company news, good or bad, why can it not be released in a straightforward, honest and public manner? Why is it secretly dribbled out to a 'chosen few' analysts who guard the information carefully to maximize the advantage of their pre-knowledge."

Ricky Rudedog, wherever you are, whoever you are, you say it better than I could.

What is the law? I asked Louis M. Thompson, Jr., president and chief executive of the National Investor Relations Institute, the association of investor relations officers, who acknowledges this practice is a problem, though not as great as it once was.

He says there really isn't much law. And what there is isn't very useful. The practice does not amount to insider trading (which is illegal) unless the analyst uses the information for personal gain, in addition to gain for his company's clients.

Selective dissemination of "material" information is frowned upon in the institute's Standards of Practice for Investor Relations. But the critical issue, of course, is the "materiality" of the information, defined by an analysts' association (the Association for Investment Management and Research) as information that "would be likely to have an impact on the price of a security or if reasonable investors would want to know the information before making an investment."

In a recent speech, SEC Chairman Levitt expressed his concern in no uncertain terms.

"The behind-the-scenes feeding of material nonpublic information from companies to analysts is a stain on our markets," he said. "This selectiveness is a disservice to investors, and it undermines the fundamental principle of fairness.

"In a time when instantaneous and free-flowing information is the norm, these sort of whispers are an insult to fair and public disclosure. . . . Unfortunately, there is no simple regulatory or legal fix to this problem. But the commission is planning to take action where it can. Within the next few months, we will consider proposing rules to close the gap between those in the so-called 'know' and the rest of us in the public."

HP's Somsak stressed that the company to this day doesn't believe that what it told analysts was all that important.

Personally, respectfully, I don't agree. The market is fragile. The company's shares had taken a beating in previous weeks because of weak showings by competitors. Everyone who follows the markets knows, as they say, that companies not meeting expectations will be "punished." It's volatile out there. (The stock is already recovering on concern that investors and analysts overreacted. Somsak said the company is buying back shares as well.)

There are 10 million online investors now and many many more who trade more or less on their own without the help of large brokerages with analysts.

Thompson believes, as do I, that information needs to be opened up "to the media and to investors to the greatest extent possible."

"We do have to be more attentive to the investment community," Somsak said.

They do indeed. In the meantime, if you are a trader, beware. You could be punished along with the company by private conversations with analysts.

If you're not a trader--if a bad week, or month, is a blip--well, there's still the principle of the thing.

What can we do if it happens to us? Yell. Call the company. You own it.

Fred Barbash (barbashf@washpost.com) is The Post's business editor.