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Law360 (April 7, 2020, 6:42 PM EDT) -- U.S. Securities and Exchange Commission Chairman Jay Clayton on Tuesday urged companies that may receive federal rescue money aimed at easing economic fallout from the coronavirus pandemic to disclose their plans with investors as best they can.
Clayton acknowledged that such matters are sensitive and subject to negotiations, but pointed out that investors will be "thirsting for information" in the coming earnings season given unusual circumstances. Earnings season is typically a time for companies to talk about their recent quarterly performance and momentum, but Clayton noted this season will be "very different" as many companies will address whether they need new capital or face liquidity challenges.
"I encourage companies to get out there [and] disclose where they stand," Clayton said in a CNBC interview, adding that effective disclosure can limit market speculation.
For companies considering new financing plans or material changes to operations, Clayton urged them to "practice good corporate hygiene and announce them as soon as you can."
Congress recently passed the Coronavirus Aid, Relief and Economic Security Act, or CARES, Act, to ease economic damage caused by the pandemic. The bill provides more than $2 trillion in relief for businesses and individuals, including a $500 billion fund to aid municipalities and distressed industries, including airlines. The bill also provides $350 billion in small business loans that could be forgiven, provided that businesses spend most proceeds on payroll and do not reduce staff.
Clayton added that companies, before they are ready to announce important developments, should keep such information "as tight as possible" so as not to feed markets with speculation.
"We really need to preserve market integrity through what we all recognize is going to be a choppy period in terms of company information," Clayton told CNBC.
Asked if retail investors may be disadvantaged against hedge funds and professional investors who are scouring the markets for clues about possible therapies for COVID-19, Clayton said the SEC is focused on providing a "framework so that information is disseminated to investors as fairly as possible." He acknowledged that demand for information about potential health care breakthroughs, including news about drug trials for new therapies, is a top priority for investors.
"We don't want to deter them," Clayton said. "We want capital to flow into places where it's going to do the best in responding to this health care crisis."
The SEC has also announced various regulatory relief to provide public companies more time to file reports given disruptions caused by the pandemic. The agency said on March 25 said disclosure reports originally due between March 1 and June 1 could be filed up to 45 days late.
--Editing by Jay Jackson Jr.
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