A financial analyst gathers and interprets large quantities of information from manysources. The analyst may use significant conclusions derived from the analysis of public and nonmaterial nonpublic information as the basis for investment recommendations and decisions even if those conclusions would have been material inside information had they been communicated directly to the analyst by a company. Under the “mosaic

theory,” financial analysts are free to act on this collection, or mosaic, of informationwithout risking violation.

The practice of financial analysis depends on the free flow of information. Forthe fair and efficient operation of the capital markets, analysts and investors must have the greatest amount of information possible to facilitate making well-informed investment decisions about how and where to invest capital. Accurate, timely, and intelligible communication is essential if analysts and investors are to obtain the dataneeded to make informed decisions about how and where to invest capital. These disclosures must go beyond the information mandated by the reporting requirements

of the securities laws and should include specific business information about itemsused to guide a company’s future growth, such as new products, capital projects, and the competitive environment. Analysts seek and use such information to compare and contrast investment alternatives.

Much of the information used by analysts comes directly from companies. Analystsoften receive such information through contacts with corporate insiders, especially investor-relations staff and financial officers. Information may be disseminated in the

form of press releases, through oral presentations by company executives in analysts’meetings or conference calls, or during analysts’ visits to company premises. In seeking to develop the most accurate and complete picture of a company, analysts should also reach beyond contacts with companies themselves and collect information from other sources, such as customers, contractors, suppliers, and the companies’ competitors.