THE New York Stock Exchange is set to change its antiquated “timely alert policy” to allow listed companies to use their websites to distribute news as permitted under the Securities and Exchange Commission’s (SEC) new guidance for Regulation FD.
As I wrote a year ago, the exchange’s current policy requires listed companies to send their news releases via fax or email to several news organizations, including Bloomberg, Reuters, and Dow Jones. Section 202.06 (C) of the Listed Company Manual also says that firms are “encouraged” to send their news to the Associated Press, United Press International, and to “newspapers in New York City and in cities where the company is headquartered or has plants or other major facilities.”
There is currently no requirement to use a paid PR wire service.
However, in its annual corporate governance letter to issuers (PDF 8 pages, 100KB) NYSE Regulation now says it is considering a change to “harmonize” its rules with those of the SEC by allowing companies to use “any Reg FD-compliant method of disclosure.”
Under the SEC’s corporate website guidance, that would open the way for some NYSE-listed companies that have high profiles and heavily used IR websites to use their websites as standalone sources of disclosure.
Many other companies will be able to use their websites in combination with other disclosure methods, such a notice-and-access news releases or notices of upcoming disclosures filed with the SEC.
By changing its policy, NYSE Regulation is following the lead of its rival NASDAQ, which currently recognizes any method permitted by the SEC. There is no indication of when the NYSE policy change will be submitted to the SEC for approval.
Business Wire says “no” to clients, but Berkshire Hathaway can
However, even with this change companies are finding that they are being thwarted in their efforts to cut costs and build their websites’ “recognized channel” status by using news releases that link to the full-text information on their websites.
I continue to hear from companies and investor relations firms that Business Wire is refusing to distribute anything other than full-text earnings releases, which can easily cost companies 10 times more than a notice-only release.
This is happening even though Berkshire Hathaway, which owns Business Wire, uses a summary-and-link method for its own earnings releases.
PR wires not simultaneous, website posting fairer
Another issue for companies to consider is that using PR wire services to send out full-text releases creates an unlevel playing field because the services cannot ensure simultaneous delivery to all investors – despite what they have been claiming for years in their marketing materials and, in Business Wire’s case, written representations the SEC (PDF 55KB).
I have previously argued that this means most companies are not complying with Reg FD by using PR wire services alone. The solution I have proposed, which has been supported by the CFA Institute in a letter to the SEC, is for companies to synchronize the posting of their earnings releases on their websites with the time that their releases are distributed via a paid PR wire service.
Companies should be providing the exact time they intend to publish their earnings releases in the notices they currently issue in advance of their earnings calls. This will enable investors to go to companies’ websites at the stipulated time to obtain the information. Currently, most companies do not provide a specific release time. Most indicate only that the release will occur before or after normal trading hours.
However, if you are going to synchronize web postings with PR wire service releases, then you might as well use the PR wire services to distribute notice-and-access releases. Doing so ensures that all investors who are interested in your information will come to your website.
That, in turn, will for the first time give you an accurate measure of investor interest in your company’s news. It also is a step towards conditioning investors to rely on your corporate website as a standalone source of disclosure.
(Thanks to Dave Lynn for pointing out the NYSE letter on TheCorporateCounsel.net earlier this week.)