Securities lawyers should roll up their Web sleeves

EVER since the US Securities and Exchange Commission (SEC) released its new guidance for company websites, corporate lawyers seem to have been struggling to see the very real opportunities it offers their clients.

Most of the law firm memos on the topic have been little more than plain summaries of the interpretive release itself, with little interpretation or practical advice on what it means for their public company clients. 

Some leading legal minds have even been quoted in the media being openly critical of the SEC. Financial Week’s Neil Roland on Monday quoted several of them in an article entitled Companies unlikely to rely on Web disclosure — SEC guidance meant to encourage companies to communicate through their websites is too restrictive, lawyers say.

Here are some key extracts:

“A mountain has produced a mouse,” said Nancy Wojtas, who served as counsel to former SEC chairmen Harold Williams and John Shad and is now a partner with Cooley Godward Kronish in Palo Alto, Calif. “The SEC needs to get more relevant to the world. It’s too slow in acknowledging the Internet.”

“There’s nothing here that will change in any significant way what expert lawyers are advising their clients to do,” said Brian Lane, director of the corporation finance division from 1996 to 1999 and now a partner with Gibson Dunn & Crutcher in Washington.

Mr. Lane’s successor at the SEC, David Martin, now a partner with Covington & Burling in Washington, agreed. He added, though: “For some lawyers and their clients, it’s a helpful way of distilling things in one place.”

Both Mr. Lane and Amy Goodman, a former associate director of corporation finance at the SEC, said the release should have contained more detailed guidance to give companies a better understanding of what is allowed.

For example, since the release encourages smaller companies to send e-mail alerts to inform analysts and investors of Web postings, it would have been clearer if it said how many such alerts are desirable, said Ms. Goodman, also a partner with Gibson Dunn & Crutcher.

Frankly, I’ve been confused by the legal community’s muted and bemused response to the guidance, which became effective on August 7. Is it that they don’t like principles-based guidance? Is it that they don’t understand this particular area well enough to advise their clients on their options?

I’ve only seen one law firm memo that got it right. That firm read the release and understood intuitively what its practical implications are, even identifying a little problem with the SEC’s guidance around blog comments.

As for the rest, I think I now know better why so many investor relations websites of US companies suck. It’s the lawyers. They don’t understand the web. Unless someone at the SEC tells them exactly what to do, they’re lost.

The fact is, there is a lot of flexibility in the SEC’s new guidance. You just have to have a sense for what is possible and think out of the box. Just a little.

At the same time that the Financial Week article was doing the rounds, the SEC’s corporation finance director John White was talking to the American Bar Association in New York. And he had some advice for the lawyers:

“The Commission’s interpretive guidance seeks to open up the possibilities for innovation in this area by clarifying some of the legal issues surrounding the use of company websites. It is my hope that you all will now step in, roll up your sleeves, and help companies to take the next steps in this area,” he said

I couldn’t agree more. Roll up those sleeves and get to work.

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