Investor Relations: Nonselective Disclosure Deep Dive with SEC Attorneys


This is a special episode on investor relations in the age of social media, releasing corporate disclosures on Facebook company pages and via Twitter, the legal risks that CEO bloggers pose to public companies,

Regulation Fair Disclosure compliance with company websites and more.   Featured guests are Brain Lane, a partner at Gibson Dunn and Crutcher and the former Director of the Division of Corporate Finance at the US Securities and Exchange Commission and Broc Romanek, the Editor of and a former counselor to SEC Commissioner Laura Unger.  

Special thanks to Dominic Jones of the IR Web Report and Mark Story, director of new media at the SEC for providing supporting information and research that was instrumental in the development of this podcast.

Michael Decker who is the disclosure expert at BusinessWire, a press release distribution service, was also scheduled to appear on this podcast, but was dropped from the call.  He will be invited to appear on another podcast.  

Request for Feedback:  This podcast breaks from the program’s original format.  There is no sound bite or set up. Instead, it moves straight from the opening main title to the interview. 

What do you think about this format change?  Should we keep it, or revert to the previous format?  

2:46 – An explanation of what Regulation Fair Disclosure is, whisper numbers, why the regulation was enacted and how public relations and investor relations officers at publicly traded companies comply with it.  

4:56 – An explanation of what selective disclosure and insider trading are, and why it is considered unfair for a publicly traded company to disclose material information in a way that could give some investors an unfair trading advantage over others.  

5:55 – How the NASDAQ bubble of the 1990s lead to enactment of Reg FD.  

7:40 – Addressing the question of whether or not press release distributions services are the only sure way to satisfy Regulation FD in light of new guidance issued by the SEC.   

8:09 – How the SEC’s view of push technology, like email, versus pull technology, like company websites has changed over the last nine years , which channel dominates today, and the use of pull technology to satisfy Reg FD.  

10:21 – How to comply with the SEC’s new Reg FD guidance and how to satisfy Regulation Fair Disclosure with the use of company websites, or online newsrooms.  “When the SEC first adopted Regulation FD in mid-2000, it acknowledged that companies may be able to rely on the web to disseminate disclosure at some point in the future, but emphasized it was not likely to be considered sufficient yet.  Now, that day has come.”  

11:01 – The eight factors for companies to consider when they want to go the online only route for releasing material information that could affect their trading value, and the challenge and irony of satisfying those factors for large and small companies.  

11:55 – An explanation of what SEC Commission guidance is and a discussion about the August 7, 2008 Commission Guidance on the Use of Company Websites for Corporate Disclosures [PDF].  

13:27 – A confirmation that public companies can satisfy Reg FD by introducing material information first on their own website, as long as they comply with SEC’s guidance.  

14:05 – Considering the following language (which appears on page 18, paragraph 2 of the guidance in the above PDF link) what determines whether or not a company’s website is a recognized channel of distribution.  

“In order to make information public, it must be disseminated in manner calculated to reach the securities marketplace in general through recognized channels of distribution and public investors must be afforded a reasonable waiting period to react to the information.  Thus in evaluating whether information is public for the purposes of our guidance, companies must consider whether and when (1) the company website is a recognized channel of distribution…”  

15:05 – Whether or not search engine optimization can play a role in helping companies comply with Reg FD.  

16:03 – The shortcomings of investor relations website outsourcing services and the NYSE’s decision in May 2009 eliminate requiring listed companies to announce corporate disclosures with press releases.  

17:32 – A second confirmation that companies can sequence the release of corporate disclosures on their own website first, if they follow it up with push technology release as well, and the commission’s guidance that “if you put something on your website, even if it wasn’t deemed to be public disclosure, they wouldn’t deem it to be a violation of FD if that’s what you did.”  

20:08 – Using the press release to alert investors in advance that a company intends to release earnings information on its website at a specific time.  

20:36 –The rationale for moving press releases on corporate websites first:  search engine optimization specialists Danny Sullivan and Lee Odden agree that companies are best situated to improve the search visibility of their corporate website by collecting inbound links, and therefore, it’s in a company’s best interests to encourage inbound links to press releases at its own domain, versus links to a paid or legit newswire, which may have distributed or aggregated that press release.  

22:30 – The growth of shareholder activism and how that may put pressure on public companies to more actively manage the investor relations section of their corporate website.  

24:35 – The importance of accessibility from the SEC’s standpoint, and whether or not regulators are coming after companies with sloppy, difficult to navigate websites.  

24:54 – SEC staff guidance that reference hyperlinks must lead directly to the pertinent content, rather than to the homepage or directory of the IR website.  Permalinks are required.  

26:31 – The use of Facebook company pages as IR websites, and a blog post by Dominic Jones of the IR Web Report about companies that are actually using Facebook pages for general business purposes, and IR specific purposes and which business sectors are the early adopters.   27:42 – Whether or not it’s legal to release corporate disclosures first on a company Facebook page.  

29:25 – Whether or not Sun Microsystems Chairman Jonathan Schwartz, who pushed the limits of Reg FD on Jonathan’s Blog, would meet the same degree of resistance today.  

31:26 – The legal challenges of public companies whose CEO blogs such as tipping off investors selectively, the duty to update and why nonselective disclosure means nonselective engagement in social media communications.  Also, the type of corporate disclosures that belong in a press release rather than a blog post.  

34:55 – The risk of blogs at company websites:  “If you sponsor a blog on your website, there’s an inherent belief that somehow you’re endorsing that what’s on the blog is accurate.”  

36:39 – Circumventing risk by blogging about nonmaterial corporate information.  

37:39 – The risk of corporate blogs being seen as semi-private conversations by the regulators, and as such, selective disclosures, and just how easy it is to break the law under Reg FD.  

39:10 – The opinion that all CEOs and all IR Officers should be blogging, as long as they are properly trained in what to say and what not to say.  The Dell Shares blog is used as a good example of an effective IR blog that did not result in any regulator violations.  

40:25 – The number of companies twittering about financial issues and a study by Q4 Web Systems about showing that 8 public companies have Twitter accounts 4 of those use Twitter for IR. (Seems to be the number must be considerable higher). 

UPDATE (Oct. 24, 2009) Sheryl Joyce, director of marketing communications at Q4 Web Systems emailed after this interview was released to inform us that the recent study her company released actually found that 80 public companies are on Twitter and 44 of them are tweeting about IR related subject-matter. The numbers cited by Broc in the interview are incorrect.  

40:43 – The challenge of putting financial information in proper perspective in just 140 characters.  The example of EBay live Twittering earnings calls.  

41:57 – A confirmation that public companies bear greater responsibility for the accuracy of content situated at their own web domain than they would for content they create on a third party social network.  

43:08 – Whether or not investors relations officers and attorneys are really ready to act on this guidance.  The legal department at Microsoft’s blog as an example of a public company that’s comfortable with social media.  

44:56 – An explanation of XBRL, an XML classification scheme for financial information.  

46:43 — Whether or not XBRL can be used to fulfill regulation FD, the real value of XBRL and the risks of serving up financial information out of context. 

48:49 — End  

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