THE US Securities and Exchange Commission (SEC) has published its 47-page interpretive release that explains how companies can use their websites and blogs to meet its requirements for public disclosure under Regulation FD.
From what I’ve read thus far, it’s clear that companies and their investor relations departments are going to need time to evaluate whether they qualify to use their websites and blogs rather than paid PR wire services to meet the SEC’s requirements.
The guidance takes a principles-based approach and does not provide a concrete example of how a company might use its website to announce its quarterly earnings, for instance. I understand that this is because the staff wanted to avoid being overtaken by new technologies that might emerge in future, but it means that there will be a lot of uncertainty among companies about whether their web disclosure practices will pass SEC scrutiny.
Possibly the biggest question for most companies will be establishing with reasonable certainty that their investor relations websites are a “recognized channel” for investors to receive information about the company.
The SEC says “whether a company’s web site is a recognized channel of distribution of information will depend on the steps that the company has taken to alert the market to its web site and its disclosure practices, as well as the use by investors and the market of the company’s web site.”
Many investor relations websites are not heavily used by investors. There are notable exceptions, but they are few and far between. Meanwhile, RSS feeds on IR sites often have only a handful of subscribers due in part to poor implementation. Most companies have a lot of work to do before they will be able to say with confidence that their websites are recognized communications channels with investors.
And then there is the fact that despite what the SEC says, the New York Stock Exchange has very specific preferences for news releases. Of course, now that the NYSE owns a wire service, it is in a bit of a conflict of interest situation with regards to this requirement. NASDAQ, which owns PrimeNewswire, doesn’t specifically require news releases, but instead follows whatever the SEC says is acceptable for Reg. FD.
Given all of this, I don’t expect a flood of companies ditching their wire services overnight and cranking out new investor relations blogs. It will take time for companies and their legal counsel to gain confidence that they can use their websites rather than the traditional methods without exposing executives to potential SEC action under Reg. FD.
Obviously, there will be a lot to discuss about the new guidance in the coming days and weeks. We will be blogging about various aspects of the guidance (not just the Reg. FD aspects) and providing practice points and real-world examples for subscribers.
For now, though, I’d recommend reading the complete release, probably more than once.
As an aside, whoever worked on this release at the SEC deserves our thanks. As SEC releases go, this is one of the clearest I’ve read. I got to the end of 47 pages and was disappointed there wasn’t more, but more about that later.