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?


Best Practices Guide to Successfully Navigating Social Media for Publicly-Held Companies

January 16, 2014

By Serena Ehrlich, Director of Social + Evolving Media

We are excited to share our latest guide for investor relations and corporate communication professionals outlining the steps they should take (and avoid) to both engage and manage their reputation across social channels.

Business Wire Benefits of SM for IROs

This report details the opportunities and risks of using social media as both a research and communication tool in today’s investor relations programs.  Included are 12 ways investor relations professionals can leverage social media tools for a stronger, more effective engagement program, as well as 12 reasons why social media platforms are not compliant communication tools.

Embracing social media as a news sharing and engagement tool

Business Wire continues to advocate utilizing social media channels to amplify the visibility of company news.  These channels, designed to enhance the communication between organizations and their members, are perfect for brand advocacy.

Business Wire’s guidance for running a successful and legally compliant socially oriented investor communication program include:

  • How to spot an emerging crisis or reputation attack using social media monitoring
  • The importance and impact of multimedia to analysts and other key constituents
  • Real time communications, or why live tweeting earnings works so well
  • Ways to initiate and expand third party sharing of pertinent company information increasing the visibility and authority of your news

Avoiding social channels as a sole means of sharing financial or disclosure oriented news

For the last 4 months, we have taken a long hard look at the concept of utilizing social media distribution channels for financial disclosure.  While we are obviously big fans of utilizing social media as a tool to share news and information, the technology simply is not there yet for these channels to replace traditional disclosure platforms.

Business Wire’s guidance on why social media platforms are not appropriate as the sole method of disclosure includes:

  • Potential coverage limitation
  • Lack of visibility of social updates
  • The impact and risk of message modification
  • Social network demographics and usage rates

To download this free guide in its entirety, visit http://go.businesswire.com/social-media-for-financial-disclosure
Share this with your friends!  Tweet this news out in one click by visiting http://ctt.ec/UEbvf

Want to schedule a time to speak with a Business Wire sales representative about social media, news distribution and disclosure compliance?  Let us know!


Regulation Fair Disclosure: Once Again in Critics’ Cross Hairs

January 3, 2013

Image

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?”

NIRI National Sessions Miss the Mark on Disclosure

June 14, 2010

– by Michael Becker, SVP, Financial Product Strategy

Michael Becker

In my humble opinion, the 2010 NIRI National Conference was a tremendous success, albeit in one area.

The annual conference committee’s courage to tackle hot button issues like the SEC’s Regulation FD Interpretive Guidance is commendable.  However, in its zealousness, I believe attendees were over-served FD, often by ill-informed “experts” and biased parties.

Ill-informed experts and biased parties speaking at NIRI National? Why, yes.

Daniel Kinel of Harter Secrest & Emery LLP, in his session “Fair Disclosure and the Web,” stated that a six-minute delay between web-posting and an 8-K was “simultaneous enough.”  (As an aside, I approached Mr. Kinel and explained why six minutes at 4:00 pm ET is a wide gap — i.e., after-hours trading.  His response: “Good point.”)

How about James Moloney of Gibson, Dunn who believes leveraging notice-and-access news release disclosure for earnings can save an issuer $40 – 50K annually?  (Mr. Moloney, ever heard of a Metro distribution?  It’s only $210).  Mr. Moloney also discussed the newswire upload process, calling it an extra, cumbersome step.  That is a pretty myopic view coming from a person who is paid to protect his clients.  The extra step ensures that material news content is vetted, secure, error-free, properly formatted and disseminated to the markets in a ubiquitous manner.  My hunch: Mr. Moloney will be busy when issuers self-publish content via WYSIWYG tools with errors (spelling, formatting, etc.).

While the web is assuredly more important for issuer communications than ever before, I do not believe there has been a seachange since the late-2008 survey that found securities attorneys favor wire services over corporate web sites for disclosure of material news. Maybe the Moloneys of the world see the Reg. FD Interpretative Guidance issue as a way to increase billable hours? Furthermore, research has shown greater dissemination improves stock liquidity and lowers volatility while enhancing a firm’s visibility; it can even lower the cost of capital.

Finally, how about ThomsonReuters, who spent a pretty penny on its lunch session, just to tell issuers how disseminating to a handful of distribution points via its mechanism is best practice? (I liken it to telling my son to strive for a C because it’s passing.)

It’s one thing to discuss a topic openly in a transparent manner; it is entirely different when NIRI members are plied with inaccurate information over the course of multiple redundant sessions.  For a more accurate look at what NIRI members really feel constitutes proper disclosure, see Neil Hershberg’s recent entry, “Common Sense in Investor Relations.”

In closing, I am young, hungry and ambitious. There is no way I would hitch my wagon to an antiquated business model. Furthermore, I am a realist when it comes to the technology adoption curve and genuinely believe if/when the time comes that another model for material news distribution is better for issuer communications, Business Wire will be right there, doing what we have done for 50 years, evolving to suit the needs of our customers.

Until then, take a step back, look past the self-interested zealots and see the forest for the trees; traditional newswire services today provide the single best method for satisfying Regulation FD disclosure. PR Newswire’s long-time consultant Mark Hynes states it best: “If I believed that they were making buggy whips, I wouldn’t be there.”


Common Sense in Investor Relations

June 4, 2010

by Neil Hershberg, Senior Vice President, Global Media for Business Wire

Neil Hershberg, SVP - Global Media

“The website-only minimum is a weak minimum . . . It’s like the NCAA requiring a 2.0 GPA. Any student should have to do more than the minimum.” –NIRI Member

It is refreshing — and reassuring — to see that common sense and reason still prevail in the investor relations industry.

The National Investor Relations Institute, the prestigious international association of IR professionals, recently surveyed its most senior members to gauge the pragmatic impact of the SEC’s “Interpretive Guidance Release on Web-Based Disclosure” [August 2008] on current news distribution practices.

The Guidance Release ranks as one of the most controversial in the SEC’s history; its lack of clarity has created considerable confusion within the IR community.

Self-styled disclosure “experts,” many masking their own commercial interests in the debate, aggressively jumped into the fray, seeking to advance their own business prospects while giving the appearance of detached observers. Fortunately, real-world transparency kicked in as the industry saw right through their vacuous arguments.

The NIRI membership survey, independent, comprehensive and authoritative, should finally settle the issue as to how the industry itself defines disclosure “best practices.”  The good news is that the overwhelming majority of respondents continue to engage in disclosure activities that serve the best interests – and information needs – of ALL market participants. The real winners here are investors as a whole, who continue to have broad and equivalent access to issuer information that may influence their investment decisions.

Among the survey’s key findings:

  • Only seven percent of respondents have made changes to their disclosure practices as a result of the SEC’s Guidance, generally adding new distribution channels. In fact, a higher percentage of respondents today are relying on paid press release services as a primary disclosure vehicle than before the SEC issued its Guidance Release. The broadly disseminated press release lives – because it works.
  • The most common reason cited for not making any changes to their current practices is because there is no compelling reason to do so. Other key drivers in the decision to retain the status quo are the desire for exposure, the greatest transparency possible, and legal opinion.
  • Many respondents view additional communications channels as supplemental to traditional channels, rather than replacements for them.
  • The use of corporate web sites for information dissemination at this time is almost entirely driven by business considerations rather than regulatory ones.
  • When asked to rank the factors that influence their decision to issue a press release versus an alternative channel, respondents ranked, on average, materiality as the most important factor, and cost as the least.

(NIRI members can view the full survey results here.)

We thank NIRI for its thoughtful, real-world guidance re: the SEC’s Interpretive Release, and for its invaluable insights on how its members have responded in terms of their own business practices.

Above all, we applaud the investor relations industry for continuing to recognize the value that a broadly disseminated press release, made available to ALL market participants simultaneously and in real-time, means in terms of full and fair disclosure. Its reassuring to know that the investor relations industry remains committed to the principles of its core mission.

We wish NIRI success at its annual meeting in San Diego June 6 -9.  There probably has never been a more exciting time to be in the investor relations industry.

UPDATE:  Mark Hynes has some additional thoughts on this topic at his own blog, in a great entry, “Why Would an IRO Limit News Dissemination?”


Upcoming Business Wire Events – May 6 Edition

May 6, 2010

Upcoming Business Wire Events

Join Business Wire experts in your area for media breakfasts, panel discussions and other insightful events. We bring local media members and industry thought leaders to your market to discuss today’s most relevant topics, from writing for SEO to marketing with social media. Best of all, Business Wire events are usually free of charge. Check out some of our upcoming events in your area:

How to Add Video into Marketing, PR and Social Media Programs to Increase Lead Conversion

Hosted by Business Wire Silicon Valley

Business Wire Silicon Valley partners with MEDIAmobz & Visible Gains to host this breakfast and panel discussion on using video to engage and convert leads.  Panelists Linda Crowe, Marketing Consultant, Former Group Manager, Media & Production, Sun Microsystems; Dos Dosanjh, WW Customer Solutions Manager, Marketing, Cisco Digital Media Creative Services, Cisco; Jay Durgan, Head of Business Development, MEDIAmobz; Cliff Pollan, Co-Founder & CEO, VisibleGains; and Mark Rotblat, VP, Business Development, Tube Mogul discuss how to integrate video across marketing channels to increase awareness, lead generation and conversion. The panel will give tips and tricks for engaging video for lead general, as well as share mistakes to avoid. This event is free for all attendees.

Visit the BW Events Page to see a video preview of this event.

Tuesday, May 11 at 8:30 am PST
TechMart Networking Meeting Center
5201 Great America Parkway, Santa Clara, CA 95054
To register: RSVP to Sandy Donnelly at 415-986-4422 x561 or email sandy.donnelly@businesswire.com by May 7

Social Media ROI: Being Seen is Not Enough

Hosted by Business Wire Cleveland [Cincinnati Event]

Your organization has started blogging, tweeting and updating Facebook, but is it working? Like many communicators, you may be unsure how to quantify the success of your social media efforts. Join Business Wire Cleveland and a panel of experts for a discussion on social media ROI measurement. Michael DeAloia of Tech Czar will moderate the panel, which also include Krisa Neher, CEO of Boot Camp Digital, Daniel Lally, VP, Pinger PR at Powers Agency and James Pilcher, Business Projects Reporter at The Cincinnati Enquirer. The panel will give advice on setting goals for your social media campaign and arm you with the tools you need to generate both quantitative and qualitative results. This event is free for all attendees.

Wednesday, May 12 at 8:00 a.m. ET
The Phoenix – Cincinnati Room
812 Race Street, Cincinnati, OH 45202
To register: RSVP to Melissa Chambers at 800.769.0220 or email melissa.chambers@businesswire.com by May 5

Media Relations Boot Camp

Hosted by Business Wire Philadelphia

Join Business Wire Philadelphia and a panel of media relations experts for a discussion on getting your news heard over the background noise. Learn about the numerous platforms in today’s communications landscape to reach the media, industry associates, investors & the public. Michael Smith, PhD, Associate Professor of Communication at La Salle University will moderate the panel, which includes Bernard Dagenais, Editor, Philadelphia Business Journal; Mike Armstrong, Business Columnist, PhillyInc Blog Editor, Co-Host of Philadelphia Business Today, Philadelphia Inquirer; Michael Wood, Sr. Manager, Communications, PECO; and Alex Hillman, social technology and community developer, co-founder of IndyHall. The panel will discuss tactics for determining which platforms are best for which audiences, pitching those audiences, the differences between social, mobile and traditional media platforms, and how to use each correctly. This event is free for all attendees.

Wednesday, May 12 at 8:00 a.m. EDT
University City Science Center
Conference Room Fuller A&B, 3711 Market Street, Ste 800, Philadelphia, PA 19104
To register: RSVP to Kate Carr at 610.617.9560 or email kate.carr@businesswire.com

Best Practices for Working with Journalists in an Ever-Changing Media Landscape

Hosted by Business Wire Minneapolis

Join Business Wire Minneapolis & NIRI Twin Cities for this breakfast and a panel discussion with area journalists. Panelists Brad Allen of MinnPost, Dirk DeYoung of The Minneapolis/St. Paul Business Journal; Annie Baxter of MPR, Jason DeRusha of WCCO-TV and Ann Harrington of The Pioneer Press discuss best practices for media relations professionals in today’s changing media landscape. This event is free for Business Wire and NIRI members and $25 for non-members.

Thursday, May 27 at 8:00 a.m. CT
Graves 601 Hotel
601 1st Ave North, Minneapolis, MN 55403
To register: RSVP to Jane Cracraft at 612.376.7979 or email jane.cracraft@businesswire.com by May 14

For more upcoming local Business Wire events or to see what’s coming up in our award-winning webinar series, visit http://www.businesswire.com/portal/site/home/business-wire-events.

Follow Business Wire events on Twitter! Hash tag #bwevents


Social Media for IROs: Understanding the Searching and Sharing Ecosystem

November 5, 2009

NIRI Logo

Business Wire’s own Monika Maeckle, Vice President of New Media, voice of @BusinessWire on Twitter, BusinessWired blogger and occasional podcaster, recently wrote an article on social media for IROs for the NIRI’s monthly Investor Relations Update trade publication.  Her piece gives an overview of the current state of social media and what it may mean to Investor Relations professionals.  The magazine is available only to NIRI members, but they have graciously given us permission to republish Monika’s article, which you can find here on DocStoc.


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