Investor Relations Spotlight: SEC Attorneys on Fulfilling Nonselective Disclosure without Press Releases

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In this exclusive investor relations episode, two distinguished SEC attorneys, Brian Lane, a partner at Gibson Dunn and Crutcher, and Broc Romanek, the Editor of TheCorporateCounsel.net, engage in a comprehensive discussion surrounding the intricacies of complying with Regulation Fair Disclosure (Reg FD). The conversation delves into the legal intricacies and associated risks of disseminating nonselective corporate disclosures through unconventional channels such as Facebook company pages and Twitter. The featured experts shed light on the potential legal liabilities that CEO bloggers may inadvertently expose their respective public companies to, emphasizing the importance of adhering to regulatory guidelines.

The discussion explores various aspects and approaches to satisfying the SEC’s Reg FD requirements, including utilizing social media posts, company websites and press release distribution services. The insights provided by Brian Lane and Broc Romanek offer guidance to investor relations professionals, public relations firms, and legal practitioners navigating the complex landscape of financial communications and securities regulations concerning nonselective disclosure.

Acknowledgments are extended to Dominic Jones of the IR Web Report and Mark Story, the director of new media at the US Securities and Exchange Commission, for their invaluable contributions in furnishing supporting information and research that significantly enriched the podcast’s content.

It’s worth noting that Michael Decker, the press release distribution disclosure expert at BusinessWire, a renowned press release distribution service, was initially scheduled to participate in this podcast but was unable to join the call. Plans are in place to extend an invitation for his participation in a future podcast episode, further enhancing the depth of insights shared with the audience.

Regulation Fair Disclosure Compliance Insights  

2:46 – Regulation Fair Disclosure (Reg FD) is a vital topic of discussion, shedding light on its implications, including whisper numbers and how publicly traded companies’ public relations and investor relations officers strive to comply with this regulation. The conversation delves into the reasons behind the enactment of Reg FD and its impact on corporate communications.

4:56 – Selective disclosure and insider trading are intricately examined, emphasizing why it is considered inequitable for publicly traded companies to disseminate material information in ways that could confer an unfair trading advantage. The discussion explores the fairness aspect of corporate disclosures and how they affect investors and market integrity.

Understanding the Genesis of Reg FD

5:55 – The NASDAQ bubble of the 1990s stands as a significant backdrop to the discussion, illustrating how historical events and market dynamics contributed to the creation and implementation of Reg FD. The insights shed light on the regulatory response to past market anomalies and the subsequent development of securities regulations.

Compliance Beyond Press Releases

7:40 – The podcast addresses the pressing question of whether press release distribution services remain the exclusive means to ensure compliance with Regulation Fair Disclosure (Reg FD). Recent guidance from the Securities and Exchange Commission (SEC) prompts this discussion, exploring alternative avenues for companies to satisfy their Reg FD obligations while keeping investors informed.

8:09 – The evolution of the SEC’s perspective on push technology (such as email) versus pull technology (like company websites) is scrutinized. This discussion delves into the dominance of pull technology today and the use of company websites or online newsrooms to meet Reg FD requirements. The SEC’s changing stance and guidance are explored in detail.

10:21 – The conversation shifts towards understanding how to comply with the SEC’s updated Reg FD guidance, particularly regarding the use of company websites for corporate disclosures. The podcast highlights the transition from initial skepticism to the acknowledgment that corporate websites can now serve as recognized channels for disseminating material information.

11:01 – The podcast introduces eight crucial factors that companies must consider when choosing to release material information exclusively on their websites. The complexities of these factors, relevant to both large and small companies, are thoroughly examined, emphasizing their implications for Reg FD compliance.

11:55 – SEC Commission guidance becomes a focal point of discussion, particularly focusing on the August 7, 2008 Commission Guidance on the Use of Company Websites for Corporate Disclosures. This guidance is explored in-depth, highlighting its significance in shaping companies’ approaches to Reg FD compliance.

13:27 – A significant confirmation emerges, affirming that public companies can indeed satisfy Reg FD by initially releasing material information on their websites, provided they adhere to the SEC’s guidance. The discussion underscores the importance of precision in following regulatory standards.

14:05 – The conversation delves into what determines whether a company’s website qualifies as a recognized channel of distribution, as outlined in SEC guidance. The podcast scrutinizes the criteria that define whether a website is suitable for Reg FD compliance, providing clarity on regulatory expectations.

Digital Landscape of Reg FD

15:05 – The potential role of search engine optimization (SEO) in aiding companies to comply with Reg FD takes center stage. This discussion explores how SEO strategies can enhance the visibility of corporate disclosures on company websites, ensuring that investors can access material information effectively.

16:03 – The shortcomings of outsourcing services for investor relations websites come under scrutiny, alongside the NYSE’s decision in May 2009 to eliminate the requirement for listed companies to announce corporate disclosures via press releases. The podcast highlights the impact of these developments on Reg FD compliance.

17:32 – The podcast reaffirms that companies can sequence the release of corporate disclosures on their websites first, provided they follow up with push technology releases. It underscores the SEC’s leniency regarding this approach, offering flexibility to companies in their Reg FD compliance efforts.

20:08 – Leveraging press releases to alert investors in advance about the release of earnings information on a company’s website becomes a key topic of discussion. The podcast examines the rationale behind this strategy and its relevance to investor relations practices.

20:36 – The podcast explores the rationale for shifting press releases to corporate websites before disseminating them through other channels. It draws on insights from SEO consultant specialists Danny Sullivan and Lee Odden to illustrate the advantages of directing inbound links to a company’s domain.

22:30 – The growth of shareholder activism is highlighted, emphasizing how it may compel public companies to take a more active role in managing the investor relations section of their corporate websites. The podcast underscores the changing dynamics in investor relations and corporate communications.

24:35 – The significance of website accessibility from the SEC’s standpoint is examined, along with the regulators’ approach to companies with websites that are challenging to navigate. The discussion underscores the importance of user-friendly and accessible websites to meet regulatory standards.

24:54 – The podcast emphasizes SEC staff guidance, indicating that reference hyperlinks must lead directly to pertinent content, not to a homepage or directory of the investor relations website. The importance of permalinks in Reg FD compliance is underscored.

26:31 – The use of Facebook company pages as investor relations websites sparks discussion, exploring how companies are adopting this approach and the early adopters in various business sectors. The podcast considers the implications of using social media platforms for investor relations.

27:42 – The legality of releasing corporate disclosures first on a company’s Facebook page is explored, shedding light on the regulatory considerations surrounding this emerging practice. The discussion addresses the use of social media in investor relations and its compliance with Reg FD.

29:25 – The podcast reflects on whether individuals like Sun Microsystems Chairman Jonathan Schwartz, who pushed the boundaries of Reg FD through blogging, would encounter similar resistance in today’s regulatory landscape. The evolution of communication in the digital age is considered.

31:26 – The legal challenges faced by public companies whose CEOs engage in blogging, particularly the risk of selective disclosure and the duty to update, are scrutinized. The podcast distinguishes between corporate disclosures suitable for press releases and those appropriate for blog posts.

34:55 – The inherent risks of corporate blogs hosted on company websites are discussed, emphasizing the perception that companies endorse the accuracy of content on their blogs. Strategies for mitigating risk through blog content are explored.

36:39 – To mitigate risks associated with blogging, one strategy is to focus on nonmaterial corporate information. By steering clear of disclosing sensitive or material data, companies can engage in blogging while reducing the likelihood of regulatory concerns. This approach allows for the open exchange of non-critical information with stakeholders.

37:39 – Corporate blogs walk a fine line when they are perceived as semi-private conversations by regulators. This scenario raises concerns of selective disclosures, potentially leading to violations of Regulation Fair Disclosure (Reg FD). The discussion emphasizes the ease with which companies can inadvertently breach Reg FD and the importance of adhering to regulatory guidelines.

39:10 – The podcast presents a compelling opinion that advocates for CEOs and Investor Relations (IR) Officers to engage in blogging, provided they receive proper training on what to communicate and what to avoid. The Dell Shares blog serves as a noteworthy example of an effective Investor Relations (IR) blog that successfully navigated regulatory considerations, avoiding violations.

40:25 – The podcast highlights the growing trend of companies using Twitter to communicate about financial matters. A study by Q4 Web Systems underscores this trend, indicating that a substantial number of public companies maintain Twitter accounts, with a significant portion using Twitter for Investor Relations (IR) purposes. However, the discussion suggests that the actual number of companies engaged in IR-related Twitter activity may be considerably higher than initially reported.

40:43 – The challenge of condensing financial information into a concise 140-character format on Twitter is explored. The podcast cites the example of eBay live-tweeting earnings calls, illustrating the unique communication demands posed by social media platforms and their implications for Investor Relations (IR) practices.

41:57 – The podcast confirms that public companies bear a heightened responsibility for ensuring the accuracy of content hosted on their own web domains compared to content created on third-party social networks. This distinction emphasizes the need for robust compliance measures and diligence in maintaining the integrity of corporate disclosures.

43:08 – The readiness of Investor Relations (IR) officers and legal professionals to act on the regulatory guidance provided is discussed. The legal department at Microsoft’s blog serves as an illustrative example of a public company that has embraced social media comfortably, demonstrating a proactive approach to compliance and engagement.

Regulatory Implications of XLBR

44:56 – The podcast provides an explanation of eXtensible Business Reporting Language (XBRL), an XML-based classification scheme designed for financial information. The discussion delves into the utility and significance of XBRL, highlighting its potential to enhance transparency and accessibility in financial reporting.

46:43 – The podcast explores the feasibility of using XBRL to fulfill Regulation Fair Disclosure (Reg FD) requirements. It delves into the real value of XBRL in facilitating compliance with securities regulations and discusses the potential risks associated with presenting financial information out of context. The conversation underscores the importance of maintaining the accuracy and relevance of financial disclosures.

48:49 – End