SEC’s new guidance for websites imminent

THE US Securities and Exchange Commission (SEC) is slated to consider publishing long-awaited new guidance governing how companies can use their websites to communicate with investors.

According to a notice, the commission will meet Wednesday to consider publishing the “interpretive release” that is expected to address a number of important issues that could set precedents for regulators in other countries.

The SEC last issued guidance for corporate website use in April 2000. An advisory committee established last year to look at simplifying corporate reporting has urged the commission to issue new guidance to address three areas:

1. Whether and how companies can meet the broad, non-exclusionary distribution requirements of Regulation FD by posting information on their websites rather than having to issue paid news releases. (See earlier post)
2. Liability for links to third-party content. The 2000 guidance addressed this issue, but has had a chilling effect on companies. Today, almost no companies link to third-party information such as research reports or media articles that would provide investors with valuable impartial perspectives on their investments.
3. Issuer liability for summary information on corporate websites. This is expected to become a big issue if the SEC moves forward with recommendations for annual and quarterly reports to be accompanied by plain language summaries.

Will usability requirements be addressed?

While there is no indication that the SEC will be addressing them, I am personally interested to see if the commission will use this opportunity to finally address the usability requirements of online disclosure documents.

While the recent e-proxy rules included requirements for companies to post their documents in formats “convenient” for both online reading and printing, these requirements are too vague. Consequently, the usability of online annual reports and proxy statements posted on company websites has fallen far below what would generally be considered good practice.

I believe the time has come for the SEC to encourage all issuers, including fund companies, to follow the widely accepted guidelines of the World Wide Web Consortium’s (W3C) Web Accessibility Initiative. Doing so will begin to ensure that all investors, regardless of ability, experience or technology platform, have an acceptable level of access to content on corporate websites.

While it would be great for investors if the SEC just came out and mandated compliance with the W3C web content accessibility guidelines, I expect that would create an uproar. But we do need to start the process, so some words of encouragement in this regard are long overdue.

Will they clarify confusion over “anonymity” and cookies?

Another issue I hope the SEC will address is investor anonymity on corporate websites. The issue was addressed in the e-proxy rules, but it was misinterpreted by the legal community and self-serving vendors to mean that companies cannot track investors on their websites even anonymously.

Consequently, companies have no way to effectively analyze how investors are using their websites in order to improve the usability of their proxy documents or their sites in general. Several of the best website analytics and usability software tools rely on anonymous cookies. Without these tools, companies are hampered in making good decisions about their website content.

To be clear, I strongly believe that investors should be able to use corporate websites and access all content anonymously, but the SEC should clarify that it does not have a blanket prohibition on cookies and other tracking technologies that do not infringe of users’ anonymity.

I must confess that I’m a little nervous about what the new guidance will contain. Anything the SEC does tends to influence other regulators around the world.

I’m also not expecting any dramatic changes around the Reg. FD requirements, although there’s a 50/50 chance the SEC could surprise on this issue. 

We’ll just have to wait until Wednesday to find out.

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