SEVERAL investor relations service providers have urged the US Securities and Exchange Commission (SEC) to block the New York Stock Exchange (NYSE) from promoting a bundle of website, PR wire and shareholder intelligence services to companies in the exchange’s rulebook.
Executives from PrecisionIR, MZIllios, SNL Financial and several smaller firms say the NYSE’s move is anti-competitive and will hamper innovation in the industry. They worry about their ability compete with Thomson Reuters and Ipreo, two vendors whose services the exchange offers free to its listed issuers.
As IR Web Report reported last month, the NYSE has asked the SEC to approve a proposal to add a new Section 907.00 to the exchange’s company rulebook that will promote a suite of optional products to its listed issuers valued at up to $100,000. The services include the NYSE’s own market surveillance products, website hosting and PR wire services from Thomson Reuters, and market analytics and shareholder ID services from Ipreo.
In their comments to the SEC, the objecting vendors are unanimous that the NYSE’s proposal will hurt competition and that including the voluntary services in the Company Handbook, which otherwise includes the exchange’s rules for listed companies, will give a false impression that using the services is a listing requirement and that the services are approved by the NYSE and the SEC for regulatory purposes.
“Eliminate our ability to compete”
PrecisionIR Group CEO Michael Pepe said in his comment: “The recently proposed Rule907, if enacted, would essentially eliminate our ability to compete for business from NYSE Euronext-listed companies. The proposed rule discourages companies from hiring independent investor relations firms by effectively adding significant incremental costs to such vendors’ services.”
He added that given a choice between getting a free product or a superior product, most companies will take the free product. And he said that innovation in the IR services industry will be stifled if the SEC adopts the rule.
“The vendors chosen by the NYSE Euronext represent the largest vendors in the investor relations market, however, they do not offer the best investor relations products or the most cost-effective solutions. There are a number of other providers that offer more innovative solutions to allow investor relations departments to function more efficiently and more effectively. If this rule is enacted, these projects could be shelved, these companies (be driven) out of business, and future development projects eliminated. “
Call for voucher program to give issuers choice
In his comments, Enzo Villani, President of MZ North America, said if approved the proposal “will legitimatize the destruction of an entire industry and award a near monopoly while thwarting competition and innovation in the sector.”
He called for the NYSE to provide a voucher program that enables companies to buy services from service providers of their choosing.
“Rule 907 states that the vendors are non-exclusive, but in practice it is not a priority as customers continue to complain about using the existing vendors in the partnership. The Rule change should add that all service providers that an Issuer wants to use, can access a voucher from the NYSE to pay for such services,” wrote Villani.
He said this will benefit the exchange as it gives issuers more choice, while heightened competition between vendors will lead to better services being available to the NYSE and its listed companies.
“This would level the playing field and allow all companies, both large and small to compete,” said Villani.
Michael OConnell, Director IR Solutions at SNL Financial, urged the SEC not to approve the proposed rule change, which he described as “discriminatory, misleading and anti-competitive.” He said approval would imply that the SEC endorses the NYSE’s preferred service providers.
“The exclusion of certain vendors from the list is also discriminatory, as there is not an equal opportunity for vendors to be included, or for listed-companies to receive comparable financial incentives should they choose to work with a vendor not included in the NYSEs subsidy program,” OConnell added.
“Will be crushed if this is enacted”
Brian Rivel, President of Rivel Research Group, said: “I am a small service provider in the IR space that is being directly impacted by this already and will be crushed if this is enacted.”
Jerry Falkner, CFA, founder of RJ Falkner & Company said: “It appears this rule would be highly anti-competitive in the Investor Relations industry by endorsing certain providers of IR and related services to the exclusion of the many smaller providers of such services that provide innovative and often-times better value to the shareholders of public companies.”
Other commenters also opposed the proposal. No comments were received in support of it by the June 13 deadline. I also submitted a comment to the SEC on the proposal today, which will probably be published tomorrow.