Credit Suisse Income Fund: Breach of Moral Obligation

Aug.30.09 | About: Credit Suisse (CIK)

Conclusion: While Credit Suisse Asset Management Income Fund (NYSEMKT:CIK) may, or may not, be in breach of Regulation FD (Fair Disclosure) in the manner it which it disseminated information regarding its most recent monthly distribution reduction, it is clearly in breach of its moral obligation to provide its own retail investors, on its own website, with the same disclosure timing it provided major data services.

Retail Investors’ Chopped Liver? While many of the data providers had already incorporated the news of a monthly dividend reduction from a monthly rate of $.03 per share to $.0265 into its database by Wednesday the 26th, it wasn’t until Friday the 28th, that a press release appeared on its own website, dated August 21st, disclosing the distribution reduction.

Under Rule 100 of Regulation FD, “As a whole, the regulation requires that when an issuer makes an intentional disclosure of material nonpublic information to a person covered by the regulation, it must do so in a manner that provides general public disclosure, rather than through a selective process.” (Italics and bold added.)

I believe a distribution reduction of almost 12% qualifies as material, non-public information, and I believe providing such information to institutional data providers prior to the release on CIK’s own website is selective disclosure.

While there are numerous safe harbors for disclosure of material, non-public disclosure, it is indefensible for such a disclosure not to be provided simultaneously on the company’s own website.

Complaint Filed: I have filed a complaint with the SEC enforcement division to investigate CIK’s disclosure process and whether it may be in violation of Regulation FD.

Disclosure: In an article posted August 26th, on Seeking Alpha, I highlighted CIK as one of the CEFs that might provide investors with an attractive secure dividend based upon a screen. (Click here for the full report.) A timely disclosure by CIK, would have excluded them from the article. I apologize to any investors who may have spent time reviewing CIK based on that article.