Investor Thoughts on the SEC’s Proposed Disclosure Reform

February 13, 2014

By Farah Merchant, Business Wire

SEC Chair Mary Jo White recently issued a staff report to Congress on disclosure reform initiatives.  The report, mandated by Congress in the 2012 Jumpstart Our Business Startups (JOBS) Act, offers an overview of the SEC’s Regulation S-K.

Regulation S-K pertains to disclosure, and first applies to companies upon IPO that register with the SEC using form S-1, and refers to ongoing reporting requirements in Forms 8-K and 10-K.

SEC reportWhite’s primary concern is the risk of information overload to investors, and she defined information overload as, “a phenomenon in which ever-increasing amounts of disclosure make it difficult for an investor to wade through the volume of information they receive to ferret out the information that is most relevant.”

She believes the guidance needs to be updated as there is repetition in disclosure, where certain items appear in more than one section, i.e., information on legal proceedings that appears in its own section but also in the notes to financial statements, risk factors and MD&A.

White addressed the need for input from market participants for the following proposed recommendations:

  • Recommending that companies file a “core document” or “company profile” with information that changes infrequently (needs to be reworded)
  • Amending the filing process by streamlining and simplifying disclosure requirements to reduce administrative costs
  • Researching ways to enhance the presentation and communication of information; and to use technology to address these issues

Click here for a copy of the full SEC report.

Is less disclosure more helpful or harmful to investors?

According to a recent Fortune article, the early opinion on the street is that although the disclosure requirements of the SEC may need an updated and possible streamlining, the information currently available is useful and helpful.

Although it may be true that not all investors read a filing in full, there are many that do, as the full filing provides insight on investment and voting decisions. By having more information available, investors feel that they can be more diligent in assessing risks. If nothing else, the recent financial crisis has taught investors a valuable lesson and that is to be more informed, more educated and to not discount risks.

So already we have a difference of opinion. On one hand you have the SEC looking to ‘simplify’ their disclosure process, with the possibility of reducing the amount of information necessary for companies to meet disclosure requirements. On the other hand, you have the street, which at first blush is more than happy with the amount of content and would be happy to receive even more granular details.

So where do you stand on SEC disclosures: More, less, or just right?


Investor Communications vs. Social Disclosure on Social Media

October 22, 2013
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By Thomas Becktold, Senior Vice President, Marketing
The Wall Street Journal’s Ben DiPietro (@BenDiPietro1) recently filed a story, “The Dos and Don’ts of Social Media Disclosure.” Not surprisingly, we have something to add.
Ben interviewed E. Terrell Gilbert Jr., an attorney at Arnall Golden Gregory LLP, who provides some solid advice to IROs, like this, “Where I think companies are prone to slip up is if focus solely on the new ways to communicate with investors but forget the basics of disclosure.”
Where the article falls short is that it doesn’t distinguish between investor communications and disclosure on social media. It doesn’t address ownership issues of executives’ personal social media accounts that are used for investor communications. It also lumps investors into a single homogenous group, where IROs know that buy-side and sell-side investors have significant differences in their preferred communications platforms and content.
While Gilbert rightly suggests that a CEO should send out a tweet that includes a link to a press release to provide more detail about the company, he mixes up disclosure and investor communications.Here’s why: the press release is the disclosure, not the CEO’s tweet.
The press release would be filed as an 8-K, issued on the wire and posted to the company’s website to ensure full and simultaneous distribution and access to all market participants. The CEO tweet is an additive part of investor communications, providing an opportunity for the CEO to more directly engage audiences, not unlike an open earnings conference call.
Gilbert notes that if companies want social media to be the first place they make market-moving information public, they should “take the right steps to let investors know the CEO’s Twitter account or Facebook page is the recognized channel of distribution…” I’m not a lawyer, so I don’t dispute the accuracy of what he says, but from a communications perspective, there are a lot of problems here.
First, if you’re going to establish an executive’s personal social media account as a disclosure channel, you better lock down some written ground rules to protect the company. If the executive leaves, does he take his channel and the followers with him? Is it ok for the executive to mix in personal posts (“look at my kid’s new puppy!”), photos and comments that may be of no interest to investors?
The National Investor Relations Institute’s Southern California chapters recently had a panel discussion on “The Future of Investor Communications.” I was fortunate enough to be on that panel with Ben Claremon, a research analyst at Cove Street Capital. That discussion provided a microcosm of the varying needs of investor constituents. Claremon was clear that he did not want companies using Twitter, Facebook or other social channels to disseminate material news. As he put it, investing and investor communications is serious business, and using the latest social channel “trivializes what we are doing.” He wants relevant information via trusted channels in a timely manner.
As we’ve discussed before, social media was not designed for disclosure, does not provide simultaneous delivery to all market participants and is often loaded with non-relevant content. Your followers or readers don’t see every post from their followers.
Facebook uses hundreds of factors to determine which posts a user would be most interested in seeing, all beyond the control of the disclosing company. Twitter offers promoted tweets, allowing an advertiser to jump ahead of organic tweets. In all social media platforms, the likelihood that your users actually see the content you share is a function of how frequently they visit their channel, how many people they follow, how much those folks post and the type of content they engage with, among other factors.
Gilbert points out that “the FD in regulation FD stands for fair disclosure” and we most certainly agree. Social media should be used as an additive to investor communications, but in no way does it provide a level playing field for all market participants.

Understanding the True Risks of Utilizing Social Media for Financial Disclosure

October 8, 2013

By Serena Ehrlich, Director of Social & Evolving Media

Last week, Twitter announced to the world it was filing its S-1 via its own social media platform.   While a few vendors in the IR + social media space praise the recent decision by the SEC to allow public companies to disclose material news via social channels, most realize this method is far from a best practice.

What is disclosure via social networks? 

In April 2013, the SEC announced that public companies could utilize social media networks as material disclosure distribution outlets, if they first let investors know which networks they were going to use.  This announcement came with a wide range of support and backlash. Those in favor believe this decision is forward-thinking and a solid fit for the way people communicate today.  Many others believe that this decision will lead to uneven access to content and the sharing of misinformation, ultimately creating a more volatile stock price.

Why are social networks bad platforms for disclosure? 

Before we start, let me reiterate, I am obsessed with social media.  I love Twitter.  I love Facebook.  I’m a wizard at G+, and yet I strongly believe social networks are terrible platforms for disclosure as they simply do not provide immediate, broad access to the news.  Below are several of the road blocks facing this practice that should be considered by every public company before considering this step.

  • Does the news fit the platform?:  Each social network has its own personality and fulfills different end user needs and desires, most of which are not aligned with most companies’ investor profiles.  Facebook, for example, is an excellent recommendation engine.  Pinterest is an aspirational website and Twitter is a continually updating information sharing tool.  None of these sites are being utilized by the average user as legitimate investment forums.  It is important to note that while platforms like StockTwits do bring the discussion of stocks onto Twitter, it is not reflective of Twitter’s overall market use.
  • Lack of visibility of Tweets and social updates:  As noted in this infographic, many company updates are simply not seen by page friends and fans. In fact, 84% of Facebook newsfeed stories are never seen and 71% of tweets are ignored.  This lack of visibility directly affects the success of social network disclosure posts.
  • Manipulated news visibility:  Every social network has the technology and ability to change the visibility of tweets and posts.  Twitter, Facebook, and other networks are monetized by advertising.  Paid tweets, sponsored posts and trends and more increase visibility of “popular” news and take valuable visibility away from non-paid status updates and posts.
  • Potential platform volatility:  Let’s face it, social networks sometimes go offline. Whether it is for system maintenance, too much volume or a DOS attack, when you choose to disclose over a social network, you put yourself at the mercy of a network only a handful of years old.
  • The old game of telephone:  When news is shared out across social networks, people frequently include their own opinion before resharing.   This leads to the possibility of message alteration (on Twitter, these changes are frequently noted with an MT which stands for modified tweet), which could directly impact perception of both the company and the news issued.  Rumors spread quickly on social networks and once misinformation is shared, the company must focus on message correction or risk stock instability.
  • Lack of access to social networks:  In 2011, a study of corporate CIOs shows that 31% of companies did not allow access to social networks during work hours, directly limiting access to real-time breaking news.  As the New York Times noted in 2012, financial institutions continue to struggle with providing traders and analysts with access to these channels.
  • Lack of immediate access to full-text:  The other issue with social networks is that they do not allow for very much text.  This means a company must state the impact of their news in as little as 140 characters and include a link to the full text article.  This 2-step process decreases potential visibility of the full story, and delays access to the news for end users.
  • The impact of delayed access to news:  One of the big discussions this summer in relation to the investment community was the financial impact of Thomson Reuter’s product that provides elite traders access to key information milliseconds before the rest of the financial community.  This service allows traders to buy and sell before the rest of the financial community. Every second counts on Wall Street. CNBC notes that within 10 seconds, hundreds of millions of dollars in trades can be completed.  Social networks are unable to confirm equal visibility of news and tweets, making it very easy for trades to be made before the news has fully been disseminated.
  • The security issue:  While somewhat rare, every social network, every website, faces potential security attacks and risks. Even the AP’s Twitter account was recently hacked, causing  widespread sharing of a false report of a shooting at the White House.  How are consumers supposed to know if your update is legitimate or not?  How quickly can a stock price be halted if false news impacts trading?
  • By the way, who actually uses social networks?:  While many buy-side analysts praise the use of social networks as research tools for reporting (a practice we highly recommend), most social site demographics are not aligned with investor audiences. Pew Internet notes that only 16% of Americans who utilize social networks have a Twitter account while 67% use Facebook.

Did we mention that we love social networks?!  So what should you be doing if you want to socialize your news, increasing overall awareness and engagement with your organization?  Business Wire continues to recommend a mix of tools including:

  • Use broad distribution via a commercial newswire to guarantee your full-text press release is simultaneously put in front of reporters, analysts and interested online parties.
  • Include multimedia to enhance your news – analysts love multimedia, especially video from senior team members.  Not only does multimedia increase viewership and news sharing, it has been proven to both drive deeper company-to-consumer relationships and also humanizes the brand.
  • Blog about it:  One of the best uses for corporate blogs is the ability to provide additional context for corporate news.  These are perfect vehicles to showcase the “why” of your story. And blogs that answer expected media and analyst questions help reporters provide better news coverage, ensuring further approved message permeation, decreasing message confusion and stock volatility.
  • Sharing news socially is a great idea!  Once your news has been posted to your website, share it out across your social channels.  Include Tweet this links inside your release copy to make it easy for your readers to share your highlights.
  • Live tweet:  One of the best ways to use social networks to share out news is to live tweet major events or news.  Draft tweets based on key elements of your press release and tweet them out with links back to your news. Include created multimedia to drive even higher engagement and sharing.
  • Utilize video chats: Create a video version of your blog and share each video’s embed links with key reporters and analysts. Today’s news outlets crave video content, as it both engages readers and increases the time the reader spends on their website. Analysts like the opportunity to see as well as hear from senior management. And of course, just like the blog, this content continues to drive message permeation.
  • Monitor the Conversation:  This is the number one way analysts today use social media.  They use it to see what people are saying about you, your product, your reputation and company.  The best way for organizations to utilize social media for disclosure is to listen.  What are people saying about your company, what misconceptions need to be clarified, what message points are resonating and which ones are not? Through listening you can not only find where conversations are occurring about your brand, but major themes, providing you with a roadmap for future discussion points.

There is a real, legitimate place for social media tools and platforms in the news distribution process, just not for material disclosure.

What do you think? Do social media platforms meet the requirement for consistent broad disclosure? We would love to hear your thoughts below!

Have questions about the role social media plays in the news distribution process? Let us know!


Common Sense vs. Nonsense: What Thomas Paine Can Teach Us About Disclosure

April 22, 2013
by Cathy Baron Tamraz, Chairman & Chief Executive Officer, Business Wire
Cathy Baron Tamraz

Cathy Baron Tamraz, Chairman & CEO, Business Wire

Herb Greenberg, the respected CNBC market commentator who first asked whether Netflix violated Reg FD with its use of social media, subsequently put the issue into its proper perspective: It’s all about “common sense.”

Unfortunately, common sense seems to be in short supply these days, as attempts to redefine “full and fair disclosure” depreciate its value to market participants.

In a prescient post in July 2012 (http://www.cnbc.com/id/48086440), Greenberg asked whether Netflix CEO Reed Hastings side-stepped Reg FD by touting on his Facebook page that Netflix had set a new milestone in monthly viewing.

The provocative post apparently caught the eye of SEC officials; the agency filed a Wells Notice against Hastings and Netflix, indicating an inquiry into whether there was a basis to pursue the allegations.

Common-Sense-DisclosureGreenberg, in a December 2012 post, reflected on the surprising reaction of some folks to the SEC’s action. As far as Greenberg was concerned, the issue was simple.

“Bottom line: I’m all in favor of social media as a point of dissemination,” Greenberg wrote.” “They aren’t going away. But public companies and executives want to use them, and they have to play by the rules. That means, simply, issue a press release at the same time. Simple common sense, don’t you think?”

The SEC tweaked the rules recently by issuing a report on the possible use of social media tools for compliance purposes. Unfortunately, the agency’s report generated a lot of heat, but little illumination.

Thomas Paine, in talking about government and society, wrote his passionate pamphlet called “Common Sense” in 1776. Written more than 200 years ago, his words are timeless:

“There is something exceedingly ridiculous in the composition of the monarchy. It first excludes a man from the means of information, yet empowers him to act in cases where the highest judgement is required.”

Common sense dictates that full and fair disclosure means that all market participants have simultaneous, real-time access to market-moving information. Business Wire has a patented news delivery platform — “NX” — that ensures network recipients worldwide have equal, unrestricted and simultaneous access.

Common sense dictates the overriding importance of network security, and the vetting of corporate announcements to validate their source. Business Wire’s network systems are audited annually by independent management consultants, ensuring compliance with the rigorous standards of securities regulators in multiple international jurisdictions. Additionally, Business Wire has close to 200 editors — and authentication procedures — to provide credible, vetted information to the capital markets.

Common sense dictates that an audit trail exists to protect issuers in the event of a regulatory investigation. As a point of fact, the SEC itself utilizes Business Wire’s audit trail when investigating companies that have caught their attention.

Common sense dictates that the recommendations of prominent professional organizations such as The National Investor Relations Institute be factored into policy decisions. Specifically, NIRI’s “Best Practices” call for a combination of Reg-FD compliant platforms to ensure the broadest possible investor outreach.

Common sense dictates that service providers adapt the latest technologies. Business Wire’s multi-channel platform has long embraced social media (it has 61 industry Twitter feeds). In fact, Business Wire is the industry technology leader with five patents, including two for social media innovations.

Common sense tells us that information should be simultaneous and ubiquitous. Excluding anyone from access to material information is the road to chaos, leading to a possible return to the “Whisper on Wall Street.” Ironically, this is the very thing that Regulation Fair Disclosure sought to eliminate in 2000.

Clearly, there is no substitute for common sense. While it is apparently lacking in some circles, the encouraging news is that the investor relations industry has a proud history of taking a pragmatic and thoughtful approach in meeting its professional obligations, as confirmed by this recent NIRI survey.

The silver lining, as Thomas Paine and Herb Greenberg have taught us, is that common sense never goes out of style.


Regulation Fair Disclosure: Once Again in Critics’ Cross Hairs

January 3, 2013

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The need for better and broader disclosure: social media added to Reg FD-compliant disclosure vehicles is the way forward.

By Neil Hershberg
 
If misguided regulatory reformers have their way, the passage of Reg FD will be remembered as “The Golden Age” of full and fair disclosure.  The global paradigm of investor protection and market fairness is once again under attack by detractors, who have seemingly forgotten the landmark directive’s true spirit and intent — as well as its clearly defined compliance criteria.

Reg FD has been a lightning rod for criticism since its adoption in 2000. The latest threat promises to further emasculate Reg FD, eroding the “level playing field” that the SEC sought to enshrine for all market participants.

Critics are pushing for the recognition of social media platforms, such as Facebook and Twitter, as Reg FD-compliant channels for investor communications. Clearly, regulatory disclosure was never intended to be a “friends and family” rewards program, but rather a compliance model designed to service the information needs of the entire investment community.

Netflix and the SEC

The latest disclosure debate recently boiled over when Reed Hastings, the CEO of Netflix, revealed on his Facebook page last July that viewers had downloaded one billions hours of streaming video the previous month. Netflix’s stock spiked to a six-week high following the post, rising 13 percent and increasing the company’s market value by $542 million in one day, according to news reports. 
 
While there were other mitigating factors that likely contributed to the sharp rise in share price, the steep escalation in capitalization caught the attention of SEC watchdogs.
 
According to the SEC, Hastings’ post contained material information that should have been broadly disseminated, as opposed to being selectively disclosed to his fortunate Facebook followers.  The SEC filed a Wells Notice against both Hastings and Netflix for violating Reg FD. While the agency’s staff is recommending that a civil claim is warranted, the commissioners must still decide whether to pursue the allegation.
 
Interestingly, Netflix filed an 8-K to announce the SEC action, and subsequently submitted a regulatory filing to announce that Hastings’ salary would double in 2013. Netflix obviously has developed a new appreciation for recognized disclosure tools in the wake of the SEC reprimand.  
 
The battle lines over the use of social media have been drawn; Hastings has become the “poster boy” of social media supporters who are aggressively lobbying the SEC to revisit Reg FD and adopt new flexibility toward the use of social media.
 
A close look at the facts, however, confirms that enabling issuers to rely exclusively on social media to reach investors would be a major step backwards, and threatens to reverse the enormous progress made in the dozen years since Reg FD was enacted.
 
According to Compliance Week, Hastings’ post was not on Netflix’s corporate Facebook page, but was published on one of his three personal Facebook accounts. Clearly, investors should not have to guess whether material information is hiding behind Door #1, Door #2, or Door #3.
 
Reg FD is remarkably clear on this point: all investors have an equal right to simultaneous, real-time access to market-moving information. They should not have to play the Netflix equivalent of “Three-Card Monte” to get access to corporate developments that may influence their investment decisions.
 
The Dilemma Facing Journalists & Analysts
 
Liz Hester, in an article for “Talking Biz News” (a site that is popular among business journalists), described the dilemma facing journalists and analysts in the event that social media supplants closely monitored disclosure platforms:
 
“This means that as a business journalist you’d better be Facebook friends, a Twitter follower, Instagram tracker, blog reader and somehow connected through every social media to the people you cover,” Hester wrote. “This means your feeds will have to cover everyone from the CEO to the marketing officer to the press person. Good luck weeding through all the baby photos for real news.”
 
Supporters of social media have seized the opportunity to attack the SEC’s stance on the use of online platforms for disclosure compliance.
 
“The SEC wants CEOS to use press releases, investor conference calls or formal SEC filings to communicate,” wrote Larry Popelka, a Bloomberg Businessweek contributor in a column that appeared on SFGate.com. “The problem with these communications is that they are cold, formal, and often don’t provide meaningful insights into company leaders’ thinking. Individuals and organizations that use social media have discovered that it is a much richer, more effective way to communicate.”
 
Popelka’s arguments are deeply flawed. How are messages that are limited to 140 characters, for example, an improvement in terms of providing “meaningful insights into company’s leaders thinking?”  More importantly, the purpose of disclosure has obviously been lost on Popelka.  Disclosure was never meant to be “warm and fuzzy.” Rather, the objective has always been to be “full and fair.” And Reg FD — in its current incarnation — does an exemplary job in accomplishing this goal.  
 
A Unified Effort to Bolster Disclosure
 
The warring factions should put their differences aside and join forces in a united effort to bolster disclosure. There is an underlying commonality of interests that everyone can agree to: the need for better and broader disclosure. 
 
The reality is that this should not be an either/or proposition. Social media is here to stay, and its importance is growing daily. Social media should be an integral part of virtually every investor communications program, in addition to any Reg FD-compliant disclosure vehicle. Using social media tools to supplement other distribution channels is a strategy that has near-universal appeal.
 
Herb Greenberg, the respected CNBC market commentator who first broached the issue of whether Netflix violated Reg FD last July, puts the issue into its proper perspective:
 
“Posting material information on a CEO’s personal social media page simply isn’t fair disclosure — no matter how many people follow it,” Greenberg concluded. “Bottom line: I’m all in favor of social media as a point of dissemination. They aren’t going away. But public companies and executives want to use them, and they have to play by the rules. That means, simply, issue a press release at the same time. Simple common sense, don’t you think?”

DISCLOSURE DANGERS: Zero Margin for Error

November 1, 2012
by Neil Hershberg, Senior Vice President – Global Media, Business Wire
Neil Hershberg

Neil Hershberg, SVP – Global Media

It’s a regulatory reality that many IR professionals are reluctant to recognize: there are no “safety nets” when it comes to the hidden dangers of disclosure compliance.

Several blue-chip companies recently experienced the sensation of free-falling in the financial markets when their earnings results or other material news announcements were prematurely released, roiling the markets. These issuers learned the obvious: there are no “reset” buttons — or retractions — in today’s era of instant information.

Disclosure compliance is a high-wire act that most IR professionals would be wise to avoid. In pure business terms, the risk/reward ratio simply doesn’t make sense. The cost-savings are modest at best, and the potential consequences enormously damaging on multiple levels.

In other words, regulatory reporting is best left to the professionals. And one shouldn’t automatically bestow that distinction on all the new entrants in the commercial news wire industry, either.

Business Wire, which has been helping public companies fulfill their disclosure obligations for more than a half century, has the expertise, technology, infrastructure, network security safeguards, and staff to satisfy regulatory requirements in North America, as well as a dozen international jurisdictions.

The core service that we provide, in addition to the simultaneous, real-time distribution of price-sensitive information to market participants, can be succinctly summed up in three words: ASSURANCE AND INSURANCE.

Business Wire’s proprietary NX technology has been awarded patents in the United States, Canada, and the European Union for its simultaneous news delivery capabilities. When it comes to full and fair disclosure, as prescribed by the SEC’s Reg FD, Business Wire’s NX technology is the only news delivery platform that has been independently validated by patent authorities on two continents.

We also undergo a gauntlet of audits annually by the world’s leading accounting/management firms, all of whom try to find fault with our network security, editorial systems, and workflow procedures. And each year, Business Wire passes muster, which results in our being sanctioned by the world’s leading securities regulators, including the FSA (UK) and AMF (France). Business Wire earns the right to operate as a regulatory disclosure in these major financial markets by demonstrating its adherence to the world’s most demanding standards. Infrastructure matters.

So does experience. At the end of the day, it’s all about people and service. Business Wire is unique in the industry as we have close to 200 editors in 21 newsrooms worldwide. We don’t operate anonymous editorial processing stations, with their “bakery number” approach to client service. We know our clients — often on a first-name basis.

What this means, in layman’s terms, is that we have your back. In the world of business, that is a priceless benefit that goes beyond simple cost considerations.

Our seasoned editors, many of whom have decades of service, pick up scores of client errors each month, ranging from inconsistent numbers in earnings announcements, wrong dates, links that don’t work, etc. Having another set of eyes look at your release prior to distribution is truly invaluable, and could spare you and your company the angst of trying to rectify a major mistake.

The “insurance” that we provide clients — mitigating potential market mayhem — may well be the best value in the entire investor relations industry.

Some vendors with skeletal service offerings have aggressively been pushing “Do it Yourself” disclosure models.

One of the most vocal proponents of the DIY model, a leading web filing service, recently went down during peak filings. The outage clearly illustrates the danger of over reliance on technology without a suitable backup system in place. In other words, DIY = DOA.

In our view, DIY vendors are doing their clients a major disservice, given all that is at stake.

Clearly, disclosure compliance is a lot more intricate– and the miscues far more devastating — than may seem obvious.

We think that the “DIY” approach is most appropriate when limited to select home improvement projects.

However, when it comes to something as serious as disclosure compliance, the risks are many and the rewards few. The wiser course of action: go with the pros.


Web-Only Disclosure: Less Continues to be Not More

June 21, 2012
by Michael Becker, Senior Vice President, Financial Product Strategy

Michael Becker, SVP Financial Product Strategy

At the recent NIRI National event in Seattle, I attended the recurring panel on web disclosure.  In 2010 I authored a post-NIRI blog about a similar Web disclosure panel and I wanted to take a few moments to tell you what has changed (or not) over the past 24 months.

So what has changed since NIRI’s first foray into discussing web disclosure?  Largely nothing.  Microsoft, the panel’s moderator, web discloses earnings-only and continues to utilize a commercial newswire for IR and PR purposes (119 times YTD), Thomson still preaches about the benefits of web disclosure in order to promote its half-baked newswire, former SEC attorneys tell us that an 8-K is disclosure and the NIRI community is yet again rendered unable to answer the key question: As communicators, is communicating less fully and less fairly okay?

The reality is that web-only disclosure cannot stand-up to what commercial newswire services like Business Wire provide quarter-after-quarter without fail:

  • Editorial Efficiency: I teach at a local business school and tell my students (repeatedly): put down your project for an hour or two and when you come back, the errors will stand out.  As professional communicators, we do not always have the option to “walk away” from our work for a few hours.  That is precisely why a newswire editor is so imperative to your news release process.  Business Wire editors work 24/7/365 for you, professionally formatting your copy while catching thousands of errors each year.  Publish press releases directly to the web and you are essentially a “Wallenda” without a net.
  • Audit Trail Assurance: From start to finish, the Business Wire process is fully audited.  We know who submitted what and when, and which editor worked on your project every step of the way.  When the SEC comes calling, and they do regularly, it is the Business Wire audit trail that protects you.
  • Redundant Systems: Business Wire spends millions of dollars each year maintaining and upgrading its replicated, secure servers in San Francisco and New York.  With Business Wire you never have to worry about website continuity.  The same goes for our InvestorHQ clients too!
  • Truly Simultaneous Distribution: Somewhere in this discussion simultaneity has fallen by the wayside.  But it can’t.  In an environment that is getting faster and faster, web posting is slower.  Why reward those with multi-million dollar systems geared to scrape your website with privileged access?  Business Wire ensures simultaneity of your news delivery – – to the millisecond.  Disseminate over Business Wire and your content is ubiquitous to the world instantly.  Now that’s full and fair!

We at Business Wire are firm believers in technology and best practices.  Admittedly, our very vocal, public stance could be construed as self-serving.  Therefore, if you can counter that disseminating a full-text press release over a commercial newswire isn’t the fullest and fairest way to achieve Regulation FD disclosure, we are all ears.


Canada Gets it Right on Fair Disclosure — Again

March 18, 2011
by Neil Hershberg, Senior Vice President, Global Media

Neil HershbergThe United States is often thought of as the global disclosure leader, but the truth is that there is a lot we can learn from our next-door neighbor: Canada.

In Canada’s typically unassuming way, the Canadian regulatory model has been adopted as the de facto prototype for the disclosure regime that has taken root in the United Kingdom and the European Union.

I’ll elaborate on the background as to how this all came about shortly. What’s important, however, is to spotlight the reasons why global regulators have come to recognize Canada’s disclosure framework as a world-class model worth emulating.

The Canadian Investor Relations Institute [CIRI], a widely respected association of industry professionals, has just updated its “Standards and Guidance for Disclosure and Model Disclosure Policy,” to reflect the regulatory and accounting changes, social media, and other factors that have transformed the investor relations landscape since its guidelines were last modified in 2006.

CIRI’s authoritative “Best Practices” resource for reporting issuers and industry professionals reinforces the central role of a simultaneous, broadly disseminated news release in achieving full and fair disclosure.

Unlike the United States, where the term “disclosure standards” is rapidly becoming an oxymoron, Canadians are crystal clear in what constitutes fair disclosure.

According to the timely disclosure policies of the TSX Exchanges and the CNSX, a full-text news release disseminated via a sanctioned news service is the only acceptable way to disclose material information. No ambiguity here. While the U.S. trumpets full and fair disclosure in principle, Canada practices it daily as a matter of regulatory policy. The result is that the entire investment community benefits from a level playing field. (Note: Business Wire is one of several approved news dissemination services in the Canadian marketplace.)

CIRI’s guidelines take a pragmatic approach to the arsenal of available investor relations tools that greatly facilitate investor outreach.

The CIRI report specifically notes that standalone web postings, conference calls, and other complementary communications channels do NOT meet Canadian disclosure requirements. Issuers, however, are encouraged to use additional delivery platforms to supplement a simultaneous, widely disseminated news release.

“As material information should be released in a manner designed to reach the widest public audience possible, including individual investors, companies are encouraged to use various technologies to supplement the news release. Some of the most obvious technologies include conference calls, webcasts, email, fax, video conferences, company websites, and more recently, corporate blogs, RSS feeds, podcasts, and social networking sites. While new technologies are important and useful ways to disseminate information, they are not substitutes for a broadly disseminated news release.” [CIRI Standards and Guidance for Disclosure, Page 18]

Talking about disclosure, Business Wire is the sponsor of  CIRI’s ‘Standards and Guidance for Disclosure and Model Disclosure Policy.”  To be clear, however, our involvement in the project came after CIRI completed its revisions; we in no way influenced CIRI’s research or conclusions. Business Wire is proud to support the activities of CIRI, NIRI, and other investor relations organizations worldwide that promote professional development of IR practitioners, and the ideal of effective disclosure.

Now, back to our story.

The London Stock Exchange went public in 2001, a decision that forced the LSE to relinquish its monopoly on regulatory news dissemination via its subsidiary, The Regulatory News Service [RNS].

The Financial Services Authority, the UK equivalent of the SEC, used the opportunity to rethink its approach to regulatory disclosure.

The FSA formed the Information Dissemination Advisory Group (“IDAG”), a committee of industry participants and outside experts to study various models and scenarios. IDAG was charged with making its recommendation to the FSA as to the UK’s future regulatory structure.

FSA officials also crossed the pond to North America, where they conducted extensive interviews with a wide range of market participants in the United States and Canada, as well as to conduct their own  observations, research and analysis.

After completing its due diligence, the FSA ultimately embraced a competitive disclosure regime whose nucleus closely mirrors the key tenets of the Canadian regulatory system.

Soon after the UK model went live in 2002, the European Union began a similar exercise — and not surprisingly, concluded with virtually identical results.

The Committee of European Securities Regulators (CESR) exhaustively evaluated a range of disclosure options over several years. CESR’s final assessment, memorialized in the Transparency Obligations Directive that took effect in January 2007, once again ratified the core Canadian/UK disclosure model as the best of all possible worlds.

With its characteristic low-key style, Canada deserves to finally be recognized as a  regulatory role model whose commitment to full and fair disclosure sets the standard for leading global financial markets.


Disclosure for Dummies: Notice-and-Access Press Releases Compared to U.S. Mail Service

January 19, 2011
by Steve Messick, Chief Information Officer, Business Wire

I always respond to a staff newbie when he or she comes into my office asking a question with, “Did you read the manual first?”  I actually prefer to use a more famous acronym but, in the interest of political correctness, will not elaborate.

But that is an important starting point of understanding any technology.  You have to read and research it.  If you still need clarification, then seek out the true experts and ask questions. If you don’t do your due diligence, then you won’t be well-informed, and will not understand the value proposition that technology brings to the table.  So, let’s get educated and talk about the real technology at work here, and examine the competing value propositions of Business Wire versus the “Notice-and-Access” model when it comes to fair disclosure.

Warren Buffett defines value as not what you pay, but what you get for your money. This is so true with applied technology.  We can all relate to the earbud example.  You pay more for a Bose earbud than a lesser brand. But have you ever sat on a noisy subway, jet, or busy freeway and tried to listen to music or talk to someone on your phone with cheap earbuds?  Forget it.  The value proposition of Bose technology is that you pay more, but you get something that actually works, meets your needs, and delivers real value. That is priceless.  When you use Business Wire, you benefit from the value of 50 years of experience and technology.

So let’s get specific here about web technology and its role in fair disclosure.  The operative word is “fair,” which is the key deliverable. Fair disclosure involves three main components: simultaneity, synchronization, and security.   Technology plays a major role in all three.

Simultaneity means that everyone has access to public company information at the same time.  No one gets a head start in acting on the news; it is simultaneous whether you are in Sydney or San Francisco.  Some folks consider posting a news release on a corporate website as simultaneous, and “fair” disclosure.  Yes, I agree that posting a document on a web site means it is available for access by everyone (at least everyone with access to the internet).   But is it “fair” access?  Absolutely not, if you understand the underlying technology.

A simple example: your local post office.   Does everyone in your town go to the same post office at the same time to get their mail?  If they did,  you would have long lines, extended waits, traffic jams,  and the person who shows up late may get their mail a day later. A single web-site has the same problem: extreme competition for access.  If thousands — or perhaps even millions — of investors go to a corporate website at the same time (at the moment of access cited in an advisory alert) to view an earnings release or other material news announcement, it is impossible to get the information in a fair and simultaneous manner.   The site is going to slow down; some investors will get the news later than others.   If the company has not invested heavily in its website infrastructure, the site may crash, or become so slow that your browser will give up.  Not fair, not simultaneous, and ultimately a low technology value proposition.

Synchronization involves the seamless linking of technical systems worldwide to deliver market-moving news to the global investment community. The moment your news release is simultaneously distributed worldwide, billions of dollars in technology at companies and institutions around the globe are synchronized to provide the information to the investor universe — instantly. That is the behind-the-scenes disclosure synchronization that powers the global financial markets. That is the value of Business Wire technology working in synchronization with the investment industry, financial information systems, and major consumer portals for the collective benefit of institutional and individual investors.  The integrated, multi-tiered pipeline that regulatory information flows through generates opinion, analysis and recommendations, all of which build value for the investor.  Independent analysis and expertise is essential for retail investors working at home, as well as the trading desks at large institutional firms.  And it all happens as a result of Business Wire feeding the pipeline.  Simultaneity drives synchronization, which drives value.  Priceless.

Conversely, Notice-and-Access (single web-site posting)  advisories impede the information pipeline and disrupt the synchronization process.    Why does UPS bring your inventory to your door? The answer is so that your business can function flawlessly, as you designed it.   If you had to jump in your truck every day and drive to UPS, then head over to Fed Ex,  and then to the Post Office  for your business inventory, is that value to you?  Your business is synchronized by the predictable flow of inventory into your manufacturing plant.  So is the global information pipeline.

The seamless synchronization of financial information is crucial for fair disclosure. If every investor has to go to UPS (your corporate website, via notice-and-access ) to get the latest news, and then go to the individual web sites of companies releasing information at the same time, it will derail the work flow process. leading to delays and confusion. Fair and efficient markets will cease to exist.

Completing the value proposition of fair disclosure is security.   Value is in knowing that your information is secure and safe until the appropriate time to share with others. Reg FD is all about keeping information secure and private, and then simultaneously providing everyone with equal access.  Any breach in this process can lead to market volatility, investor uncertainty, and potential lawsuits. Is that value?

Keeping your information safe until public disclosure is a complex technology puzzle.   Business Wire’s 50-year track record in secured technology systems means that your information is safe and protected. Posting on a corporate website can be very risky unless the company has invested significant resources in security safeguards. Business Wire’s systems and networks are subject to rigorous annual audits to ensure that your information is secure. Security is at the heart of what we do, and a major element of Business Wire’s core value proposition.

There is a de facto manual for full and fair disclosure, based on real-world applications. Business Wire is proud to be a major contributor to the pragmatic, best-practices model that serves as the backbone of full and fair disclosure in financial centers throughout North America and the European Union. Not only did we read the manual, we helped write it.


Disclosure: The Dawning of the Age of Precarious – Let the Sunshine Back In

November 18, 2010

by Cathy Baron Tamraz, Chairman and Chief Executive Officer, Business Wire

Once upon a time, in the Year 2000, a wonderful law was passed that protected the interests of all investors in our great land. You may have heard of it; it was called Regulation Fair Disclosure.  Thanks to the great mind of Arthur Levitt, the “whisper” and good ol’ boy network that had gone on for far too long on Wall Street by those in the know, was finally curtailed.  Good triumphed over evil on October 23, 2000 – and all of our citizens were protected.

Reg FD served to shine a bright light on material information, so that now everyone had equal access to all news that could impact a stock price.  It was a great day for the retail investor, and all was well in our land. The new words of the day were “full and fair for all.”   Transparency and simultaneity were now the gold standards and endorsed and enforced by our nation’s regulators.

To assist in ensuring that all companies now played by these new rules, “neutral” services like Business Wire were touted and recommended as best practice and “valuable” newswires for the purpose of making news ubiquitous and available to all. This made sense because it confirmed the vital role they have played for 50 years in helping to keep “law and order” on the Street. Further, our nation’s regulators relied on Business Wire’s audit trail to help keep our markets honest. Business Wire’s proprietary news delivery platform ensured simultaneous, real-time access to all investors.

Regulation FD flourished, and all was well.

But alas, in August 2008, a seemingly insignificant event led to some unintended consequences – a dark cloud now hovered over full and fair disclosure.

 

Image by Flickr user r8r

 

In an attempt to embrace new technology and encourage more disclosures, not fewer, an interpretation (not a rule change) was added to Reg FD that encouraged the use of company websites as an enhancement.  This certainly made sense because it provided an added venue for material news, thus widening access. Our regulators wanted to appear current and relevant – and that made sense.  All seemed fine in our great land . . . the more, the merrier. Or so it seemed.

But then something strange happened . . . self-anointed experts promoting their own commercial agenda decided that restricting the information flow by limiting it to a company website ONLY, was now good enough.

Let the people figure out when and where the information is available. Let the reporters, analysts and investors troll through thousands of websites to find and report on the information. Let the algo traders, who have the most sophisticated systems, get a jump on the news and perhaps beat out everyone else. In effect, let the retail investor eat cake.

Even worse, questions around system crashes, redundancy, security and simultaneity were not even addressed, because those who were now playing in this arena had no idea of its complexity – and had not even thought it through.  What about those vital security audit trails?  What about protection from insider trading allegations with standalone web disclosure?  What about server crashes? What about redundancy and simultaneity?

Alas, darkness was falling . . . and the proof was in the proverbial pudding. In the few instances where this “standalone methodology” was followed, the truth revealed itself. Confusion now reigned, as investors scrambled to get the news.

THE MORAL OF THE STORY:

Reg FD’s level playing field is in danger of going “POOF”, turning a prince back into a frog.  However, this parable can still have a happy ending.  We can’t let the Holy Grail of full and fair disclosure slip away. The SEC did not intend it to be that way – just read the SEC’s CIFiR report, citizens.

This much we know: Reg FD was meant to protect all investors – and retail investors, in particular, dread a return to the dark days (and Wall Street whisper) of disclosure. Therefore, we ask our nation’s protectors to slay this dragon, to clarify both the spirit and intent of the Interpretive Guidance, and to let the sun continue to shine on our financial markets.


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