On July, 30 the Securities and Exchange Commission (SEC) published its recommendations for public companies in their efforts to comply with the securities laws “while developing their Web sites to serve as an effective means for disseminating important information to investors”.
sparked a hot debate among IR and financial PR professionals, who are trying to figure out what the impact is. Many IR/PR agencies make good money writing and distributing press releases on behalf of public companies. Since a public company must announce any change in ownership and significant deals as well as notifications, earnings, profit warnings etc. to the public at large, the financial press release was the only way to go.
By opening the possibility of posting all of the above on a corporate blog, it could mean the “death of the press release” as one PR professional put it. IR and PR circles were abuzz with speculations how the major new distribution agencies such as PR Newswire would take it.
Public companies have been weary of using the Internet as a public space for the dissemination of material information, not in the least since they need to comply with Regulation Fair Disclosure (Reg-FD) and Sarbanes-Oxley (SOX) rules. The SEC is now opening the possible for companies to adhere to regulatory policies without using some of the more traditional methods such as financial press releases. If public companies would opt en masse to use the Web for information distribution, particularly for earnings disclosure, it would have a huge impact on IR and financial PR agencies as well as the newswires.
Thus far, most companies have been leery of using websites to provide investors and other audiences with regulated information, such as earnings.
Beth Harbin, director of PR for Southwest Airlines, is hesitant about changing its current system with PRN, though she acknowledges the positive benefits, which have helped carve out a place for earnings on the airline's website."Since we started our... site, we've always had a vision of making it extremely robust," she said. "We currently have earnings up on our website, as part of a system developed through [PRN]," she said. "It also puts that release right in the hands of the reporters who need it."
It is at this moment not clear what the full impact will be. The SEC document seems to indicate that the SEC wants to open the use of public companies’ websites as part of the whole process of disclosing information in accordance with the Regulation FD.
The SEC stated that it “believes that company disclosure should be more readily available to investors in a variety of locations and formats to facilitate investor access to that information. Investors are turning increasingly to electronic media and to company and third-party websites as sources of information to aid in their investment decisions."
It seems that the SEC does recognize a company website as a channel of distribution. The information must be disseminated in such a way, that it is available to the securities marketplace in general.
How can a public company guarantee that? By taking more affirmative steps so that investors and others know that information is or has been posted on the company's website.
Trying to avoid the costs of issuing a financial press release (of which many companies complain), would not only incur alternative costs (e.g., mailing list and distribution + follow up, SEO, administration, legal & accounting department) but could also jeopardize compliance with SOX.
What would therefore be the best option for public companies to ensure the availability of their information to the investor and securities communities? Correct, by sending out their announcement as a press release!
Using (only) their website for announcements will be risky. Companies will need to consider whether the postings on their websites are “reasonably designed to provide broad, non-exclusionary distribution of the information to the public.” This would entail serious organic SEO or in-house website management with tracking and reporting capabilities.
Another issue is the requirement that the website's capability must meet the “simultaneous or prompt timing requirements for public disclosure once a selective disclosure has been made." This puts a strain on a company’s resources. For practical reasons alone, sending a financial press release via the newswire remains the preferred option, since it will be pushed to Yahoo Finance, MarketWatch, MSN, CNNMoney, CNBC, Factiva, Forbes, Fox Business News, Lexis/Nexis, sites operated by major financial institutions and trading firms, blogs etc.
It relieves the public company from the burden to determine whether its website qualifies as a "recognized channel of distribution" and whether web posting achieves simultaneous disclosure. If you are the IR Officer, CFO, CEO or Legal Advisor of such a public company, you would have your work cut out for you, and the SEC doesn’t supply comprehensive guidelines or instructions to that effect.
The SEC's Advisory Committee on Improvements to Financial Reporting states in its final report: "Of course, the increased use of corporate websites is not intended to affect the valuable role that newswires and other news vehicles play in disseminating important company information to investors and the public."
Despite the fear of many IR and PR professionals – the SEC is not killing the press release, it just hands us another IR & PR tool.