|The concept of full, fair and simultaneous disclosure will be taking a giant step backwards on Monday. In case you missed it, Sun Microsystems CEO Jonathan Schwartz has announced that Sun will post its fourth quarter and full 2007 fiscal year earnings announcement on its web site, submit an 8-K filing and will make it available to its RSS subscribers. Ten minutes later, the release will be broadly disseminated via a commercial news service.
Sounds great in theory, and Sun’s approach is in compliance with Regulation FD. The problem is that while Sun is living up to the letter of Reg FD, its actions run counter to its spirit and intent, and threatens to do investors a tremendous disservice by setting a bad precedent.
Schwartz has adroitly positioned himself as a modern day champion of the people, proclaiming that Sun is making market-moving information available to the masses for the first time.
The reality, however, which Schwartz either doesn’t understand or chooses to ignore, is that price-sensitive information is universally available–simultaneously, in real-time, and at no charge–right now, and has been since the dawning of the Internet age.
Schwartz writes on his blog that Sun’s decision “will place, for the first time, the general investing public–those with a web browser or a cell phone–on the same footing as those with access to private subscription services.”
Very noble, certainly great PR, but flat-out wrong.
Anyone, anywhere, can access Business Wire and its competitors at no charge on dozens of free financial portals and websites, in addition to many other traditional and online platforms. With Business Wire’s patented NX delivery platform, time-sensitive news is available at the same split second to investors worldwide.
Sun’s decision to disclose via the web and RSS feeds, followed by broad wire delivery, is disclosure deja vu–a return to the bad old days before Reg FD made an earnest attempt to level the playing field.
Prior to Reg FD there was a 15-minute delay that, for all intents and purposes, enabled those with privileged access to corporate information to make market decisions before the same information was disseminated to the general public.
In September 2000, Business Wire made a bold and unilateral decision to end the 15-minute delay, and to make market news universally accessible to everyone without reservation. We remain strong proponents of Regulation FD, and the principles of full, fair, and simultaneous disclosure. That’s why we are speaking up, as others seek to erode it.
Schwartz’ grandstanding masks several important substantive issues that Business Wire has addressed previously.
- RSS feeds are not simultaneous given the Internet’s architecture. Steve Messick, our chief information officer, recently blogged on the subject, explaining in layman’s terms why RSS feeds fail to meet the disclosure litmus test. Steve attempted to arrange a meeting with Jonathan to discuss the issue, but his invite has thus far gone unanswered.
- Given Sun’s core business, server capacity is unlikely to be an issue when Sun posts its earnings Monday. After all, Sun is the world’s fourth largest maker of server computers.
For thousands of other listed companies, server capacity is likely to be a real issue, especially given the anticipated spikes in volume that usually accompany material news announcements.
Sun’s potential to derive commercial benefit from companies ramping up their server capacity begs the obvious question: does Jonathan Schwartz have a hidden agenda in promoting Internet disclosure?
- Others have been quick to jump on Schwartz’ bandwagon, including Dominic Jones, who writes IR Web Report. We think that people who preach disclosure should practice it to the extent that they clearly spell out how they conceivably could benefit from a major policy shift.
Jones is an IR web consultant; he, too, potentially stands to reap financial rewards should Internet disclosure take root, and demand for his services increase.
It is worth noting that the European Commission rolled out its Transparency Obligations Directive [TOD] this past January in an attempt to introduce harmonized, pan-European disclosure standards across its 27 Member States.
The EC, the Committee of European Securities Regulators, and others literally spent years studying various disclosure models. After all, they were starting from scratch, and they were anxious to do it right.
At the end of the day, they decided upon what is often called the “North American Disclosure Model,” which is based on a push delivery, multi-channel platform that serves as the backbone of the U.S. and Canadian financial markets.
The U.S. Securities and Exchange Commission, whose commitment to protecting the interests of individual investors has recently come under attack, should take a stand and unequivocally declare its firm support for a disclosure model that guarantees simultaneous, real-time, and unrestricted access for all investors.
Sun should live up to its name and illuminate the path to greater transparency, instead of promoting a return to the dark days of disclosure.
Neil Hershberg, Senior Vice President, Global Media