The chatter among public relations and investor relations practitioners this week is about pending (read that word again for emphasis, please) new guidelines from the Securities and Exchange Commission (SEC) regarding the notorious Reg-FD – the set of SEC rules guiding fair disclosure of material information to the public. On Wednesday this week, the SEC commissioners voted unanimously to “provide new guidance to public companies about how to comply with the securities laws while developing their Web sites to serve as an effective means for disseminating important information to investors.”
While those of us with Reg-FD and Sarbanes Oxley publicity regulations battle scars are waiting to see the official guidelines, some people are couching this vote as the final nail in the press release coffin. Let’s not be too hasty.
Fundamentally, Reg-FD protects investors and prospective investors by making disclosure of material non-public information simultaneous and widespread. In other words, a company needs to broadcast the disclosure of material information – information that will affect a stock price once made public – so that all investors can have access to it at the same time. Traditionally, this has meant using a newswire for such disclosure so that the information can be seen far and wide, and be easily discoverable on the Internet.
The SEC’s vote will (may?) amend this practice to allow Reg-FD disclosure on company websites in, what one IR website refers to as “certain circumstances.” Some people have interpreted this decision to mean that blogs can now be used to disclose earnings information to investors and therefore the press release is dead.
That’s probably too overstated and certainly premature. The SEC guidelines are not yet public information. What is public, as of today, is the 120 page (excluding the appendix) “Final Report of the Advisory Committee on Improvements to Financial Reporting to the United States Securities and Exchange Commission,” which on page 108 states:
The SEC has issued a series of interpretive releases and rules addressing the use of electronic media to deliver or transmit information under the federal securities laws. The SEC issued its last comprehensive interpretive release on the use of electronic media, including corporate websites, in 2000. Since 2000, significant technological advances have increased both the market’s demand for more timely corporate disclosure and the ability of investors to capture, process, and disseminate this information. Recognizing this, the SEC has adopted a large number of rules that mandate, permit, or require disclosure of the use of corporate websites to provide important corporate information and developments. The SEC has voted to publish an interpretative release to provide guidance regarding the use of company websites under the Securities Exchange Act of 1934 and the antifraud provisions of the federal securities laws.
Nowhere in the 120 pages of the report or the 60 or so pages of appendix will you find the words “blog” or “social media.”
That’s not to say blogs, forums or social networks won’t be impacted. In fact, in the press release issued by the SEC, Chairman Christopher Cox says, “The last time the SEC issued guidance in this area, the idea of ‘social networks’ hadn’t yet been developed, and creating a social network where shareholders could meet and exchange views was barely imaginable. Ongoing developments in technology have increased both the markets’ and investors’ demand for more timely company disclosure on the Web, and in turn, raised new securities law issues for public companies to consider.”
Cox’s tenure as chairman of the SEC has been regarded by many as leading the SEC to live in the modern world. No question there is more consumable, and therefore more valuable, information available on the web than in the lengthy tables and text contained in a form 10K – the legally required content of an annual report – for example. That’s really cool, and great news for investors. It may even be great news for web design firms and companies like WordPress. Likely this does not spell disaster for Business Wire, PR Newswire or Marketwire, nor for the press releases they issue.
No one knows yet for sure, because as mentioned before, the “interpretive release” from the SEC is not yet available. TheMoPRBlog asked Business Wire, PR Newswire and Marketwire for their reaction to this news, and all three had no comment to make because there is in fact nothing official yet about which a comment can be made. Once the SEC issues its guidance, these newswires will issue their own.
What may be of more concern to the PR profession is the notion of “under certain circumstances” as raised in the first sentence of the IR Web Report’s article. By way of analogy, think of how another government institution uses this same notion: stuff you pay for is tax deductible… under certain circumstances.
Guidelines are better when the issues are both easily understood and the outcome is binary; you either can do something, or you can’t. Tax laws aren’t binary, and therefore a great many people are forced to rely on outside help when preparing their tax returns, whether that help comes from a tax accountant or from software. The implications of adding a swath of gray to what is now black and white is troubling. Not only does it mean confusion and the possibilities of making mistakes (mistakes made by public companies can result in fines or even jail time for CEOs), it also creates an environment for potential abuse.
When discussing this issue with a corporate counsel friend of mine, he said “adding a subjective element to this process will open the door for mischief.”
Those like Brian Solis, of whom we’re big fans, who think this is the death knell for the press release are focused on form and not substance. Maybe the social media press release will replace the old text-only press releases of years past. The wire services themselves now offer social media wires and XHTML-based content, and our agency has invested in the in-house development of our own social media newswire to issue these social media enhanced news releases, so it’s fair to say that the traditional release will evolve. But changes to the SEC guidelines are probably not going to eliminate the need to cast a wide net so that material non-public information can be made simultaneously available to all investors, nor should they. Not all investors use social media, despite Jonathan Schwartz’s – and quite frankly, Mobility PR’s – desire to make social media ubiquitous.
Instead of waiting for the SEC to catch up to technology advances, social media and blogging companies may want to drive technology advances to catch up with the appropriate need for fair disclosure. TheMoPRBlog guesses that the forthcoming guidelines from the SEC will create the environment where such advances will be both compelling and profitable.
We invite your comments.