ONE OF THE hottest topics of conversation in the US investor relations profession right now is using the web for disclosure and communications to investors. It was a dominant theme at the recent National Investor Relations Institute (NIRI) annual conference in San Diego, and the discussion has continued in various trade publications and online forums.
IR professionals have lots of questions about it, some are even debating themselves. There are many misconceptions, myths, fears and doubts, some of it being deliberately stoked by people who are understandably concerned about what a move to web disclosure means for their services.
Here are some of the most common questions we’re asked about online disclosure, along with answers that I hope will help to clear up some of the confusion. If you have any questions of your own, post them in the comments below or in IR Web Report’s LinkedIn group and we’ll do our best to answer them.
1. Does web disclosure mean we only post information on our IR website?
No, this a major misconception. While web disclosure means that a company’s own website is its primary channel of communication, a well-designed online company disclosure model involves using a variety of direct channels to distribute company information and make the market aware it.
The idea that web disclosure forces people to hunt for information or stumble across it on a company website is a fallacy invented by critics who mostly have a vested interest in maintaining the old full-text PR wire model for disclosure.
The fact is, the SEC’s guidance does not allow companies to post information randomly on the web. There are clearly defined standards and principles companies have to abide by. For example, information must be prominently posted in a readily accessible format in a location routinely used to make such information public.
That said, the SEC’s guidance does recognize that standalone web postings can meet the requirements of Reg FD, but the circumstances under which this would be the case are likely limited to only the most well-followed companies. But in saying that a standalone website posting can make information public for the purposes of Reg FD under certain circumstances, the SEC provided a major concession to companies because most companies’ website posting practices go much further than mere standalone postings on their websites.
For instance, most IR websites today have integrated email alert utilities that automatically send out emails to investors when new information is posted on the site. Many also have automated web feeds, which in turn may be picked up by search engines and aggregators. And a growing number of companies now also push out information to social networks like Facebook and Twitter.
But even if a company doesn’t have these things on its IR website, in practice there is probably no such thing as a “standalone” website post. At the very minimum, just about anything that companies post publicly on their websites will be indexed by search engines in short order. Additionally, if the information is important, you are most likely going to have to submit it to the SEC, which further results in it being widely disseminated to the financial media and scores of public investment websites.
2. Should we stop using PR wire services?
Eventually you might stop using PR wire services, but for now PR wires will play a much less prominent role in how companies disseminate their disclosure information. Under an online disclosure model, PR wires become alerting mechanisms rather than disclosure ones. Companies use the PR wire circuits to make the market aware that the company has posted important news on its website. The releases are notices containing links to the full-text disclosure on the company’s website. This was permitted even before the SEC issued its guidance for company websites in 2008, but the guidance made it clear that this is one way to help make information on a company website public for the purposes of Reg FD.
The reason you shouldn’t send full-text releases via a PR wire service is that doing so makes the PR wire the main channel of disclosure rather than your website. You want your website and associated technologies to be the recognized channel so that you can use your website more proactively and provide more interactive technologies without an ever-present fear of breaching Reg FD.
Some PR wire services will happily help companies schedule and distribute advisory news releases (sometimes referred to as “notice-and-access” releases). They are PR Newswire, Market Wire and GlobeNewswire. More recently, Thomson Reuters has announced that it will provide PR wire-style services in the US that will support advisory releases. Business Wire is the only PR wire services that does not support advisory releases for web disclosure.
Strictly speaking, for almost all types of disclosure information you could stop using PR wires today if your company is listed on the New York Stock Exchange or Nasdaq. That’s because both now recognize any “Reg FD compliant” method of disclosure for all but a few unusual disclosure events. However, some investors are accustomed to accessing company information via PR wire distribution points, so it’s important to continue to use this channel — but only to advise investors when you post new disclosures on your website.
In the longer term, we believe that most investors and their intermediaries, such as the professional financial newswires and investment websites like Yahoo! Finance, will source company disclosures either directly from companies themselves or from EDGAR.
3. Will I have to improve my investor relations website?
That depends on the state of your current website. However, most companies don’t have to make any significant improvements to their sites if they just want to start using advisory PR wire releases to direct investors to full-text releases on their websites.
However, there are a wide range of improvements that companies should make, such as adding self-publishing capabilities to their sites, improving their push technologies, adding new social media channels, and improving the general visibility and usability of their website disclosures, among other things. None of these improvements is particularly difficult, and most can be done using freely available technologies and tools.
Web server reliability is often mentioned as a major issue by critics of web disclosure, but it’s not an issue for the vast majority of companies that outsource their IR websites. All the big IR website vendors, including Thomson Reuters, Shareholder.com and SNL Financial, have robust server infrastructures than can easily accommodate even the busiest sites. Even smaller firms like Q4 Web Systems host their services on highly stable and secure servers, the same ones used by the EDGAR public dissemination system.
Even so, it’s a good idea to plan ahead for possible server outages. You can reduce demands on your company’s servers by using full-text web feeds rather than summary feeds and by including a link to your EDGAR page in your advisory PR wire releases and other notices if you are submitting the information to the SEC around the same time as posting it on your website.
4. Where does social media fit into web disclosure?
It’s a good idea to establish accounts on social networks and content sharing sites for your IR department and to simultaneously post alerts and content to them when you post new information on your IR website. Using these channels is typically free and easy to automate. Q4 Web Systems has integrated social media updating into its self-publishing software for IR departments and we expect other vendors will follow soon.
It’s an especially good idea to set up accounts for your company on social media services that are specifically designed for investors, such as StockTwits and Seeking Alpha. These enable you to reach a more qualified audience. StockTwits will soon be rolling out great new features specifically for IR departments (disclosure: I consult to StockTwits).
But remember that social media is not just about pushing information out. It’s a two-way medium and you should be willing to monitor and respond to investors who engage you via social media. This doesn’t happen often in investor relations, but you should be prepared to respond to investors when they do interact with you.
If you plan to use social networks to keep investors informed about new disclosure information, you should update your disclosure policy and take steps to inform investors about how you use your social media accounts and where investors can find them. It’s a good idea to also provide prominent links to your company’s social media accounts on your IR website.
5. Why not just keep doing what we’ve always done?
If you’re confident that your current practices meet all of your regulatory obligations, you obviously have no reason to change your disclosure dissemination practices. However, it’s not safe to assume that practices you’ve been following for years are still effective. A lot has changed on the regulatory and technology fronts over the past few years and many companies are changing their disclosure practices.
The onus is on you to ensure that your current practices meet the requirements of Reg FD. Increasingly, that’s not a certainty. Also consider whether failing to establish your IR website as your company’s recognized channel of disclosure is going to hamstring your department’s ability to reach new investors and build stronger relationships with existing ones.
Obviously, we think a well-planned online disclosure model is the best option for companies today. It allows them to achieve absolute certainty for compliance while improving their ability to directly communicate with their investors.
- Buy The New Online Disclosure — practical guidelines to help companies implement an online disclosure model that ensures absolute certainty of compliance with Reg FD while enabling companies to take advantage of new online communications channels.