Monday, May 29, 2006

In a world where truly independent stock research is a valuable and rare commodity, SEC Insight is even more unusual. The firm makes its calls after poring through correspondence and other internal S.E.C. documents it secures by filing requests under the Freedom of Information Act. Ever since John P. Gavin, a former money manager and chartered financial analyst, founded SEC Insight six years ago in Plymouth, Minn., he has prided himself on its ability to sniff out regulatory trails like a corporate bloodhound.

During the last two years, however, Mr. Gavin says, his snooping and his ability to send early warning signals to clients have been stymied by an unlikely adversary: the S.E.C. itself. The agency, overshadowed by aggressive prosecutors like Eliot Spitzer, the New York attorney general, has gone to great lengths recently to reassert itself as Wall Street's top cop. But the S.E.C. has made it nearly impossible for Mr. Gavin to round up documents it once routinely provided to his firm. Mr. Gavin's experience, he says, suggests that the agency, which bills itself as the investor's advocate, is less than forthcoming about what it actually finds at the companies it polices.

"In this post-Enron era, as the S.E.C. demands record levels of disclosure from public companies, it's a shame that the agency itself has become disclosure-challenged," Mr. Gavin said.

It is a troubling paradox, Mr. Gavin says. The S.E.C., which requires public companies to make full disclosure of all meaningful facts, has stopped granting most of Mr. Gavin's requests for regulatory correspondence. For his part, Mr. Gavin has sued the agency in federal district court in Minnesota, seeking to compel compliance with federal disclosure laws.
Read the whole thing.