UNDER certain circumstances, companies can rely on their websites and blogs to meet the public disclosure requirements under Regulation FD, according to new guidance unanimously approved by the US Securities and Exchange Commission today.
The move is significant as it could cut disclosure costs for many companies that today use paid PR wire services to distribute their disclosures. It could also encourage companies to make investments to improve their investor relations websites and facilitate the use of blogs for communications with investors.
Previously, the SEC held that corporate websites could only be used as part of the disclosure process, but with the new guidance corporate websites or blogs can now be the sole means of disclosure. The SEC began studying the issue in late 2006 after Sun Microsystems CEO Jonathan Schwartz called the news release requirements an “anachronism.”
Is it a big step, or little step forward?
According to the staff’s statement, the guidance “addresses circumstances in which, for certain companies under certain circumstances, posting non-public material information on a company’s web site, in and of itself, may be a sufficient method of “public disclosure” for purposes of satisfying the alternative public disclosure provision of Regulation FD.”
Companies will need to consider “whether the company web site is a recognized channel of distribution and whether the information is ‘posted and accessible’ and, therefore, ‘disseminated.’ As part of that evaluation, companies also would need to consider their web sites’ capability to meet the simultaneous or prompt timing requirements for public disclosure under Regulation FD.”
Until we have the full interpretive release — expected within the next week or so — it remains unclear to me what specific conditions a company will have to meet to rely on website or blog postings. It also seems that there may be requirements for advanced notice to be provided when companies plan to use their websites or blogs for scheduled disclosures such as earnings releases.
Commissioner Paul Atkins, attending his last meeting on the commission, said company managers would still be taking some risks using their websites or blogs under Reg. FD. He characterized the guidance as “a step forward.”
However, Chairman Chris Cox called the new guidance “a big step forward for investors.”
Liability for blogs, no duty to correct others’ comments, and linking outside
The new guidance also addresses several topics that I wrote about in my preview of today’s meeting. There is further guidance on links to third-party information; guidance for summary information and archives; and clarification of companies’ liability for third-party information and comments on company blogs and discussion forums.
Importantly, while the new guidance says that companies and their employees are liable for information they post on blogs and discussion forums (not really news), they have no duty to correct inaccurate information posted in comments on their sites by third-parties.
In terms of links to third-party information, the new guidance “suggests, among other things, that companies explain the context for the hyperlink to make clear why the hyperlink is being provided, be aware that selective choices to hyperlink to specific third-party information may indicate that the company has a positive view or opinion about that information, and consider using other methods to denote that the hyperlink is to third-party information.”
In addition, the guidance clarifies that information posted on company websites is not generally subject to rules under the Sarbanes Oxley Act relating to a company’s disclosure controls and procedures, except where the SEC’s rules specifically require information to be posted on company websites, such as waivers to companies’ codes of ethics or insider transaction disclosures.
Unless required, online documents need not mirror printed ones
Finally, and what I believe may be the most significant part of the release, is new guidance that says web-based disclosure documents do not have to be in “a format comparable to paper-based information, unless the Commission’s rules explicitly require it.”
That is a welcome clarification and could encourage companies to be more innovative and creative in how they present their disclosures online rather than merely dumping documents in PDF or image-based documents that mirror the printed documents.
John White, director of the SEC’s division of corporation finance, said the new guidance was intended to promote “more innovation, more creativity, more use of interactive technology on company websites and that they become more user-friendly for investors.“
MySpace, LinkedIn, Facebook, Blogs, RSS roll off Cox’s tongue
If you are in any doubt about what the commission is seeking to achieve with the new guidance, I thought Chairman Cox’s opening remarks were particularly interesting. This must be the first time an SEC chairman has used the words blogs, Atom, RSS, Facebook, YouTube, LinkedIn and MySpace all in a single breath. Here’s my transcript of part of his opening statement from today’s webcast:
Ongoing technological advances in electronic communications have increased both the market’s and investors’ demand for more timely company disclosure and the ability for companies to capture, process and disseminate this information to market participants.
Indeed, one of the key benefits of the Internet is that companies can make information available to investors quickly and in a cost-effective manner. The use of electronic media is arguably superior to providing company information the old way. It’s a better way to provide information to most investors since today it can be presented in interactive format that allows each individual to click through or drill down to the level of detail that’s appropriate to him or her.
The Internet has changed a lot since 2000 which was the last time the commission provided comprehensive guidance on this topic; the use of the Internet and electronic media. Back then the idea of the web as a social network was still being developed and websites such as MySpace, YouTube, LinkedIn and Facebook didn’t even exist. The idea of creating a social network where shareholders could meet and exchange views was barely imaginable. Blogs hadn’t really entered the public lexicon. And syndication technologies such as Atom and RSS were still in development.
But as each of these technological developments has taken hold in the marketplace, that in turn has raised new securities law issues for companies to consider. Technological advances and the reduced costs associated with the implementation of technologies over time, now allow the inclusion of more interactive and current information on company websites than was the case previously. That’s moved websites beyond being just electronic filing cabinets for electronic documents. Today, company websites are being shaped by the market’s desire for highly current and interactive information.
We recognize that allowing companies to present data in formats different from those dictated by our forms or more technologically advanced than Edgar can be a significant help to investors.
As an aside, you may also be interested to see that the SEC now is using Twitter to dis
tribute its news releases.
Once the full release is available, I will spend some time to go through it and assess what the practical implications are for IR website managers. Check back or subscribe to our RSS feed or email alerts. Oh, and we’re on Twitter here http://twitter.com/IRwebreport
Our prior coverage on this topic:
- SEC’s new guidelines for websites imminent (July 28, 2008)
- SEC seeks to “blow up” forms-based system (June 25, 2008)
- Earnings releases — the Warren Buffett way (February 24, 2008)
- NYSE’s antiquated Timely Alert Policy (January 20, 2008)
- SEC urged to provide new IR website guidelines (January 13, 2008 )
- The truth about Sun’s Web-first earnings release (August 1, 2007)
- Sun dumps PR wires for Reg. FD (July 25, 2007)
- We don’t need PR wires for Reg. FD (March 27, 2007)
- SEC assessing blogs for disclosure, says Cox (January 10, 2007)
- Websites and blogs should be approved for scheduled disclosures (October 5, 2006)
Dominic, this is excellent news and it appears the SEC actually exceeded all of our expectations.
As always, thanks for the excellent information and analysis you have provided on this so far. I am in Europe and won’t have time to go through it myself for a few hours, so your insight and analysis is once again invaluable!
Regards,
George
Hi George,
You’re right. It is a surprise. I said there was a 50/50 chance they’d recognize websites and blogs as being equivalent to PR wires.
But it does seem that they’re saying companies first have to be able to show that their sites and blogs are go-to resources for investors. And, as you know, due to long-term neglect, there are few companies that can be confident of that.
But if companies ever needed an incentive to improve their irrelevant IR websites, being able to cut out costly PR wire releases is probably going to do it.
[...] Dominic Jones, IR Web Report: [...] The move is significant as it could cut disclosure costs for many companies that today use paid PR wire services to distribute their disclosures. It could also encourage companies to make investments to improve their investor relations websites and facilitate the use of blogs for communications with investors. [...]
[...] IR Web Report explains, “UNDER certain circumstances, companies can rely on their websites and blogs to [...]
[...] development is pretty ground-breaking and potentially game-changing (there’s a good overview at IR Web Report). In many ways, the SEC is really just recognizing the digital media explosion that has occurred [...]
[...] According to an IR expert in new technologies, Dominic Jones, “The move is significant as it could cut disclosure costs for many companies that today use paid PR wire services to distribute their disclosures. It could also encourage companies to make investments to improve their investor relations websites and facilitate the use of blogs for communications with investors.” [...]
Hi Dominic,
Long time (since my PR work for CCBN).
So, can you explain why Berkshire Hathaway bought BusinessWire? And why exactly can’t Yahoo Finance and Google offer free distribution of releases or anything a company feels like sharing?
I really like Tom Foremski’s take on the news – especially since he ran with my Utterz post and tip: http://www.siliconvalleywatcher.com/mt/archives/2008/07/sec_likely_to_c.php
Hi Adam,
I can’t explain Mr. Buffett’s decision. I’m sure the cash flow looked good, but I think if he had realized that BW is essentially a technology company, he might not have been so willing.
From what I’ve read, the deal was done very quickly.
Hi Dominic,
I see said the blind man.
The quoted text I used is from your Web site.
Thanks for pointing that out Dominic – All credit to you for that quoted text!
Great post on your site – Let’s see if the Wire services feel like commenting and becoming part of the conversations/blogs. Doubt it
[...] IR Web Reportは次のように説明している。「一定の状況下では、企業はSECの規則Regulation FD（公正な開示のための規則）に基づく財務情報の開示を、企業のWebサイトやブログで行うことができる。そのための新たな指針が、今日SECにおいて満場一致で承認された。」 [...]
[...] to a report this week from IR Web Report, under new guidance unanimously approved by the US Securities and Exchange Commission, companies in [...]
Here is a link to Business Wire’s preliminary statement on the issue:
http://www.businesswire.com/news/home/20080801005612/en
Tom, Thanks for the update. I’m pasting Business Wire’s full statement below. However, I don’t understand why you’re wasting your clients’ time by suggesting they download the CIFiR report on this issue because the committee’s recommendation for new guidance is now addressed by the SEC’s interpretive release. The report also does not contain anything substantive on this particular topic. Unless that’s the intent, to bamboozle folks with unnecessary information?
Finally, how come Business Wire and the other wires never mention that US investors who invest in foreign companies on overseas exchanges — or even via the US OTC market! — generally do not get their information via US wire services? Given the stats show a dramatic increase in foreign investing by US investors, it would seem they are happy going to those companies’ websites for their information after receiving an email or RSS alert. Doesn’t that call into question the claim that Business Wire is indispensable to US investors?
August 01, 2008 12:23 PM Eastern Daylight Time
Business Wire’s Preliminary Comments on SEC Disclosure Vote
NEW YORK–(BUSINESS WIRE)–Regarding the SEC’s recent webcast concerning news dissemination and the use of corporate web sites and/or blogs as a possible means of disclosure, Business Wire believes it is wise to wait until the SEC’s interpretive guidance is published before issuing a detailed response.
However, we continue to maintain that simply posting material news on a corporate web site or using blogs does not meet the spirit and intent of Regulation FD because it is neither simultaneous, nor full and fair. It is Business Wire’s belief that this is not what the SEC intended.
As we have stated in the past, the use of web sites as an ancillary means of news dissemination is, in our view, a best practice. However, web posting or blogs alone are not a substitute for secure and simultaneous push delivery of material news to the disclosure media, financial markets, on-line web portals, aggregators, and the global investing public. Neither does it accomplish the requirements of the major stock exchanges.
There is currently much speculation and misinformation surrounding the SEC’s upcoming report. However the CIFiR Report (SEC’s Advisory Committee on Improvements to Financial Reporting) is available and we urge you to review it: http://www.sec.gov/about/offices/oca/acifr/acifr-finalreport.pdf.
Upon the issuance of the SEC’s complete interpretive guidance report, Business Wire will provide a more detailed analysis and response.
Contacts
Business Wire, New York
Phyllis Dantuono, + 1 212-752-9600
Neil Hershberg, +1 212-752-9600
http://www.businesswire.com
[...] is the notion of “under certain circumstances” as raised in the first sentence of the IR Web Report’s article. By way of analogy, think of how another government institution uses this same notion: stuff you [...]
[...] web. The US Securities and Exchange Commission has just approved new rules that allow companies to publish information under fair disclosure legislation on company websites. Doesn’t sound revolutionary, but it is a big deal for companies in the States. Previously, [...]
[...] SEC OKs websites and blogs for Reg. FD [...]
Can private companies use networking web sites like http://www.breadstreet.com to make their offers available to investors? I see that many sites ask investors if they are accredited before they give them access.
[...] to meet the public disclosure requirements under Regulation FD (Fair Disclosure), according to recent new guidance unanimously approved by the US Securities and Exchange Commission ’ Condolences to my friends at PR Newswire , in lieu of flowers please post applicable positions [...]
[...] Public companies issue a lot of press releases. Some of them are issued to announce something to the press or to brag but many others are issued simply to comply with the SEC’s public disclosure provision of Regulation FD. What that means effectively is that if you ask the CEO of a public company about her company she can’t tell you anything that isn’t publicly disclosed. That used to mean either an SEC fling or a press release. Welcome to 2008 and thank you to the SEC, the SEC now recognizes company blogs as public disclosure. [...]
[...] and to date, the securities regulators haven’t sufficiently addressed the Finance 2.0 era. They’ve started, but there is a lot of catching up to [...]
[...] to Jennifer Leggio and the IRWebReport for getting this story [...]
[...] July 30, 2008 the SEC provided guidance on the role of Blogs, RSS and other Network-based communications in compliance with Reg FD. Public [...]