Yesterday, the US Securities and Exchange Commission (SEC) approved new guidance for publicly-listed companies in using traditional websites and social media channels like blogs to meet the SEC’s public disclosure requirements under Regulation FD.
Regulation FD (‘fair disclosure’) sets out a clear rule relating to the selective disclosure of information, and clarifies some issues under the US law of insider trading.
The SEC’s new guidance on what tools companies can use concerning Reg FD is a huge step forward in opening up the closed world of regulated financial communication, providing companies, investors and anyone with an interest in a US-listed company with better means to more easily find, share and interactively make use of information that’s offered in electronic form.
It seems to me that the SEC’s announcement vindicates efforts over the years by influential voices such as Sun Microsystems’ CEO Jonathan Schwartz who have called on the SEC to open up the regulatory framework governing financial communication.
So what does the SEC’s liberalization move mean for communication and investor relations?
While I’ve not studied the SEC’s preliminary statement yet in real depth, two immediate thoughts come to my mind:
- This could be the moment, the tipping point, when the social media news release really comes into its own, given its purpose of presenting news and information in a format that is designed for online interactivity.
- It could well give a kick in the pants to how corporate websites are managed and controlled, opening up the development of those sites into genuinely interactive and useful tools. A bit like how blogs work in many ways.
Others with unquestionably deeper knowledge than me about financial communication have posted some excellent first thoughts.
[...] The move is significant as it could cut disclosure costs for many companies that today use paid PR wire services to distribute their disclosures. It could also encourage companies to make investments to improve their investor relations websites and facilitate the use of blogs for communications with investors.
[...] What I believe may be the most significant part of the release, is new guidance that says web-based disclosure documents do not have to be in â€œa format comparable to paper-based information, unless the Commissionâ€™s rules explicitly require it.â€
That is a welcome clarification and could encourage companies to be more innovative and creative in how they present their disclosures online rather than merely dumping documents in PDF or image-based documents that mirror the printed documents.
[...] The guidance, which will be effective upon publication in the Federal Register, does imply that there are certain stipulations that public companies must meet in order to take full advantage of the guidance. And, as with any disclosure, the companies should tread carefully in determining what should be disclosed, where and how. No matter, this is definitely an advancement that positively impacts companies, investors and social media pundits.
[...] Bottom line? If used carefully, this new method of disclosure could be a boon for social media allies, as well as public company marketing budgets and Web presence alike. However, the wire services are likely going to suffer a bit of a loss.
[...] Companies now will be permitted, under certain circumstances, to distribute investor information via Web sites exclusively â€” instead of through a system limited to SEC filings and widely distributed news releases. The guidelines are intended to help investor relations in using that less-understood manner of dissemination.
They also clarify how the antifraud provisions apply to statements made by the company â€” or a person acting on the company’s behalf â€” in blogs and electronic shareholder forums. And they explain that companies cannot require investors to waive protections under the federal securities laws as a condition of participating in a blog or electronic shareholder forum.
[...] “It’s a better way to provide information to investors, because today it can be presented in an interactive format that allows each individual to click through or drill down to the level appropriate to him or her,” said [SEC Commissioner Christopher] Cox. “We recognize that allowing companies to present data in ways different from our current forms and in more technologically advanced ways than Edgar can be a significant help to investors.” Edgar is the SEC’s system of Electronic Data Gathering, Analysis, and Retrieval.
So, the first takes on a move by the regulator of the world’s biggest and most influential financial market that has huge implications for communication and investor relations.
And not just within the US – the SEC’s new guidance will no doubt be studied carefully by regulators, communicators and IR practitioners elsewhere.
Incidentally, the SEC is now participating in Twitter.
Not a bad indicator that individuals within are taking this seriously.