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.

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Posted by Phil Dennison, Senior Marketing Specialist, Business Wire

Social Media in the Spotlight: Business Wire CEO Cathy Baron Tamraz Talks About the SEC’S Guidance on CNBC

April 11, 2013
by Neil Hershberg, Senior Vice President, Global Media/Business Wire

Business Wire CEO Cathy Baron Tamraz is rapidly becoming the public face of full and fair disclosure.Tamraz appeared on CNBC’s “Closing Bell” Tuesday, where co-anchors Maria Bartiromo and Bill Griffeth interviewed her on the potential market implications of the SEC’s recent guidance on the use of social media for Reg FD compliance.

Video Clip:

Tamraz quickly distilled the key issues of the disclosure debate, explaining that popular social media platforms such as Twitter and Facebook — while effective in extending investor outreach — are only one component of full and fair disclosure. She added that social media complements other Reg FD-compliant channels, including a broadly disseminated news release via a legitimate wire service, posting on an IR web site, webcasts, and regulatory filings. All these elements contribute to a “Best Practices” disclosure program that equitably and inclusively serves the needs of all market participants.

She emphasized that Business Wire makes extensive use of social media tools as part of its multi-channel distribution platform, and that the company holds five technology patents, including two in social media. One patent — its “NX” news delivery platform — is key to the disclosure discussion because it ensures simultaneous, real-time access to market-moving information by all network recipients worldwide. Simultaneity and market fairness is what Reg FD is all about; Business Wire’s unique ability to meet this stringent requirement has been independently validated by patent authorities in multiple jurisdictions.

Additionally, Business Wire provides an audit trail for every release, which is a critical benefit in the event of a regulatory investigation. There also are multiple archives, including such popular databases as Factiva and Lexis/Nexis, that provide an easily accessible and reliable record of all corporate announcements.Tamraz has emerged in recent years as an outspoken advocate of Reg FD’s guiding principles: full and fair disclosure and a “level playing field.”  She has written extensively on the topic, appeared before regulatory agencies and advisory councils focusing on corporate governance issues, and is the industry’s most vocal proponent of providing all investors — institutional and individual alike — with equal and unrestricted access to price-sensitive information.

Press Release:
Business Wire Says Social Media Platforms Are Only One Component of Full and Fair Disclosure and Offers Issuers a Guide on How to Effectively Use Social Media Tools http://www.businesswire.com/news/home/20130404006180/en/Business-Wire-Social-Media-Platforms-Component-of%C2%A0Full

Blog Post:
What Can Louisville’s Kevin Ware Teach the SEC and Public Companies About Social Media?
http://blog.businesswire.com/2013/04/04/what-can-louisvilles-kevin-ware-teach-the-sec-and-public-companies-about-social-media/

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Posted by Phil Dennison, Senior Marketing Specialist, Business Wire

What Can Louisville’s Kevin Ware Teach the SEC and Public Companies About Social Media?

April 4, 2013
by Thomas Becktold, Senior Vice President, Global Marketing

Turns out, quite a bit.  You see, within hours of his terrible injury on the basketball court, fans were flocking to Twitter to offer their support.  Unfortunately, most were initially going to a fake Twitter account and weren’t engaging with Kevin Ware at all.

Following the April 2, 2013 SEC Report of Investigation that says social media accounts fall under the guidelines of their 2008 Interpretive Guidance Report on IR sites, we have put together some tips to help public companies in their IR social media efforts.

Social media engagement should be a part of the communications mosaic, but it is not a replacement for full, fair and simultaneous distribution of news achieved through Business Wire.  Investor relations professionals appreciate that their audiences are diverse and dispersed and use a wide range of platforms and content sources to access material information.

SEC_Blog_Post_Graphic

Social Media Opportunities for Public Companies

  • Social media channels offer the ability to gather intelligence and engage in two-way conversations, and as part of a comprehensive communications mix, are quite valuable.
  • Companies should establish official IR-specific social media channels on key platforms, even if they are not ready to use them.  If the channels are not active, put a disclaimer or keep them dark.
  • For those with a solid understanding of social media and their investor audiences, regular, consistent use of the channels for both good news and bad news is key.  Just like any other disclosure platform, don’t tweet or post only the good results and skip the bad ones.  Once you commit to adding a social media channel to your communications mix, stick to it.  If you discontinue use of a channel, communicate that as well.
  • Establish and publish a clear policy on your company’s use of social media as a supplemental channel to alert investors of disclosure press releases and filings.  Cross-reference those channels on your IR site, press releases and filings.
  • Listen to conversations and track sentiment and influencers, including your company’s Twitter “Cash Tag” – tweets tagged with your ticker symbol preceded by a $.  Business Wire now offers social media sentiment analysis reports for press releases via our partnership with NUVI.  For real-time monitoring and engagement, the NUVI platform provides an easy visual representation of influencers and sentiment based on the terms you choose.

Social Media Cautions for Public Companies

  • Full and Fair Access:  According to Pew Research as reported by TechCrunch, only 16% of adult US Internet users are on Twitter.
  • Privacy: Social media channels have barriers to entry and require the user to set up accounts and agree to the terms and conditions of each channel.  Your company does not control those terms and they may be objectionable to those interested in your news.  Chances are, your own IR site, as a best-practice, does not require visitors to agree to terms and conditions to access material news.
  • Fragmentation: Where’s Waldo meets disclosure.  As an IRO, do you opt for a wide, instantaneous Business Wire distribution or solely post to Twitter or Facebook and hope people find your material information?  Ask yourself, how do your investors, potential investors and media currently access your news?  Chances are, it’s through a widely divergent set of sources.
  • Simultaneity: The fact that users must click on a link to read a full-text announcement (that will reside elsewhere) adds latency and unfairness to the disclosure process.
  • Usability: Is social media going to meet the needs of your audiences?  Is it realistic to ask your institutional investors to hit “Like” on Facebook to get the latest earnings release alongside their elementary school friend’s picture of their latest cake or new puppy?  Should you expect your retail investor to stop relying on their brokerage account to access your news because it’s no longer there and instead subscribe to your Twitter feed?
  • Security: Don’t use social media as your sole means for disclosure: Look at Kevin Ware, the Louisville basketball player and what happened on Twitter just after his recent on-court accident.  Someone set up a fake account because, yes, we know it’s that easy to do.  And, that fake account had more followers than his real account.  Imagine potential investors searching in vain for the “real Twitter account” for your company when breaking news happens?  (Or finding that the official account has been hacked, as recently happened to both Burger King and Jeep.) Want to get a “verified” account?  Good luck —  and it might not make a difference anyway, according to this recent Mashable article. The Business Wire slug ensures a seamless, secure, audited experience.
  • Reliability: Twitter has been riddled with outages as it grows – think how many times you’ve seen the Fail Whale. Business Wire operates at 99%+ uptime.   With your news widely distributed, if one site or system goes down, investors have many others to turn to.
  • Liability: Leveraging a Business Wire distribution ensures full and fair distribution.  Tweeting a release today is akin to walking across a frozen lake in late March.  Your odds of making it across are good, not great.

Want to read what journalists and others are saying about the SEC ruling?  Here are a few links – the comments sections often provide greater insight for you to consider as a communications professional:

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Posted by Tom Becktold, SVP Marketing, Business Wire

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.

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Posted by Phil Dennison, Senior Marketing Specialist, Business Wire

A GUIDE TO GLOBAL IR: Leveraging Languages and Platforms to Reach International Investors

June 19, 2012
by Neil Hershberg, Senior Vice President, Global Media
Neil Hershberg

Neil Hershberg, SVP – Global Media

A recurrent theme at this year’s recent NIRI conference was the growing importance of global investor relations, and the corresponding need for international “best practices” standards.

The heightened industry focus reflects the realization that today’s financial markets transcend geographic boundaries, and that the competition for capital is more intense than ever.

While the spotlight on global investor outreach is certainly welcomed, the reality is that many of today’s accessible and affordable turn-key solutions are inadvertently ignored. The ability to seamlessly connect with a much larger investor universe is within easy reach of virtually every issuer; most importantly, it requires no budget-busting expenditures in the way of expanded infrastructure or staffing.

The key is to capitalize on the full potential of the major financial platforms that serve as the lifeblood of the global investment industry. Specifically, this means leveraging the multilingual platforms of the leading news/data systems, regional financial services that are hugely influential in their respective markets, and postings to non-U.S. portals that are closely monitored by the retail sector.

There is a natural tendency to narrowly view Bloomberg, Dow Jones and Thomson Reuters as largely an English-language bridge to international investors.  Yet these powerful, robust platforms reach investors worldwide in scores of languages. (Bloomberg, for example, hosts 41 languages.) This important capability is largely underutilized, and should be a strategic element of all multi-dimensional investor relations campaigns.

To be clear, English is universally recognized as the international “language of business.”  Yet there are sizeable audiences with substantial assets whose preference remains their own native languages. The major financial services, locked in a fierce competitive battle for subscribers, are keen to cater to these diverse constituencies.

Business Wire is the only commercial news wire that has committed the necessary resources to fully capitalize on this obscured opportunity. Simply put, Business Wire’s geographic and linguistic footprint is the largest in the industry, enabling public companies to target portfolio managers and retail investors in developed and emerging markets alike, reaping the unbridled benefits of these powerful platforms.

To put this potent opportunity into perspective, Business Wire releases are available in 19 languages on the Bloomberg terminal: Chinese, Czech, Danish, Dutch, English, Estonian, Finnish, French, German, Hungarian, Italian, Japanese, Latvian, Lithuanian, Norwegian, Polish, Portuguese, Spanish and Swedish. The scope of languages available on Dow Jones and Thomson Reuters is comparable. Collectively, these financial systems approach some one million subscribers in the international investment industry.

Additionally, there are other prominent platforms popular with international investors that include Business Wire in more than a dozen languages, e.g. FactSet and Factiva.

Another important resource that is easily overlooked is the regional and national financial services that lack the profile — but certainly not the credibility or local influence — of their global industry brethren. These information providers can prove to be extremely effective in mapping an international outreach campaign with their pinpoint saturation of key money markets.

Business Wire content is broadly accessible via these respected regional providers, including SIX Information (one of Europe’s largest financial systems); vwd (a major presence in the D/A/CH region); Interfax (the dominant business news service in Russia/CIS); Agência Estado (Brazil’s leading financial news service); awp, the Swiss financial news agency; and Jiji Press, Japan’s leading financial news wire.

Supplementing these premium services, which primarily target professional portfolio managers, retail investors worldwide can routinely track corporate developments via leading financial portals, including such popular sites as Infobolsa, abcbourse, and BFMbusiness. Like Business Wire’s distribution network itself, our online reach continues to be a never-ending work in progress, with pending additions including Il Sole 24 (Italy) and Quick (Japan).

This year’s NIRI conference was entitled “Great Expectations.”  By simply leveraging readily accessible – and comparatively affordable — options, IROs are likely to experience “Great Realizations” in achieving their global outreach goals.

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Posted by Phil Dennison, Senior Marketing Specialist, Business Wire

TRUNCATED TRANSPARENCY: The JOB Act’s Compressed IPO Cycle and its Hidden Implications for Market Fairness

April 27, 2012
by Neil Hershberg, Senior Vice President, Global Media/Business Wire
Neil Hershberg

Neil Hershberg, SVP - Global Media

Welcome to the new era of clandestine compliance.

The newly passed JOBS Act (Jumpstart Our Business Startups Act) has come under withering attack by an influential chorus of critics. They are sounding the alarm that the Act dangerously dials back the disclosure obligations of “emerging companies” seeking to go public.

To be clear, we are not talking about mom-and-pop operations here. In Washington’s grandiose way of thinking, “startups” are defined as having revenues of up to $1 billion annually.  In other words, the majority of companies opting to go public will now get up to a five-year exemption from many of today’s more stringent disclosure requirements.

The controversial legislation has drawn fire from leading journalists, including Andrew Ross Sorkin of The New York Times; securities regulators, including SEC Chairman Mary Schapiro; and shareholder advocates, including Barbara Roper of The Consumer Federation of America. The consensus view is that the JOBS Act is a regressive measure that threatens to erode many longstanding investor safeguards. Clever acronyms aside, the JOBS Act is broadly portrayed as weakening the safety net for investors.

The JOBS Act does create new channels for pre-IPOs to communicate with the investment community. However, the Act effectively closes the blinds on the closely monitored IPO pipeline, precluding the ability of investors to delve deeply into the dealings of companies under consideration. Under the new ground rules, prospective IPOs are now protected by a cloak of sanctioned secrecy during the protracted filing period leading up to their public offering.

The result is that clarity has given way to opaqueness. IPOs are now able to engage in confidential discussions with the SEC about their plans to tap the capital markets, until 21 days before the IR Road Show cavalcade begins.

Critical corporate information that was previously made available to investors months in advance — including financials and insights into the company’s organizational structure — can now be legitimately withheld from public scrutiny until three weeks before the investor marketing process gets underway.

What this means in practice is that investors essentially have about a month or so to evaluate the financial viability of a company preening to go public; previously, interested investors had a minimum of several months to do their due diligence.

There also is a more subtle side effect to today’s cloistered IPO process, one that further distorts the dynamics of a fair and competitive marketplace.

The SEC approved a rule change last December that allows NASDAQ to offer “free” corporate IR services, e.g. press release distribution and IR Web hosting, to IPOs and companies that transfer their listings from the NYSE.

Coincidentally, all these corporate services are provided by NASDAQ’s wholly owned subsidiaries, thwarting competition. The ability of NASDAQ to bundle IR services with its listing fees effectively elbows other service providers — many with superior, more advanced product offerings — out of the equation.

The agency’s approval came despite what we believe was a preponderance of evidence that the practice was anti-competitive. Ironically, SEC Chairman Schapiro was recently called to testify before a Congressional committee looking into the agency’s lack of economic analysis in its rule-making process. Clearly, the SEC should have done a lot more home work before rendering a decision in favor of NASDAQ’s rule change.

For all its political promise and good intentions, the JOBS Act has made a bad situation worse. Any pretense of market fairness during the IPO birthing process has now lost all credibility.

Today’s closed environment allowing IPOs to silently snake their way through the filing process has reinforced NASDAQ’s unfair competitive advantage, eliminating any premise of meaningful competition. Not only does NASDAQ have the inside track, but the track itself is now largely hidden from public view.

In perhaps the cruelest irony, the JOBS Act may result in the ultimate unintended consequence: potentially destroying jobs in a robust industry that has long thrived based on a model of fair and open competition.

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Posted by Phil Dennison, Senior Marketing Specialist, Business Wire

The European Commission’s Stealth Decision on Transparency:

November 9, 2011
For publicly listed companies, transparency is not an option — it is an obligation.
by Neil Hershberg, Senior Vice President, Global Media

Neil HershbergThe European Commission said as much when it implemented its harmonized pan-European disclosure standards for the 27-member European Union in January 2007. The compliance guidelines were aptly titled:  the Transparency Obligations Directive ["TOD"].

Therefore, the European Commission’s puzzling proposal to make interim management statements and quarterly reports voluntary for all EU issuers is beyond baffling. And given the global market machinations attributable to the roiling European debt crisis, the timing of the Commission’s diffused disclosure requirements couldn’t be worse.

Perhaps most upsetting of all, the Commission’s decision to truncate its transparency criteria for all EU issuers was apparently arrived at in a stealth manner.

In the way of background, the European Commission held public consultations on its plans to “modernize” the four-year-old TOD in the spring of 2010.

A key focal point of the discussions was the desire by SMEs (small and medium-sized enterprises) for relief from ”the administrative burden” associated with trading on regulated markets.

Large-cap companies quickly capitalized on the opportunity,  arguing that they too were overwhelmed by the statutory requirements and lobbied to be similarly exempt from quarterly financial filings.

Most market observers dismissed the outcry by large-cap companies as simply an attempt to latch on to a market reform movement that was gaining momentum. Few, however, believed that large-cap companies would be included in any revamped reporting requirements.

Some 16 months after the original consultation period, and without any further debate or notice of its intentions, the European Commission announced its surprise retrenchment proposal, abolishing the requirement that public companies publish quarterly financial information.

The Commission did the unthinkable, effectively waiving the need for all listed companies, regardless of size, to issue quarterly reports. Under the revised landscape, companies are only obligated to file half-year and annual results.

In retrospect, the Commission took the easy way out. Faced with the challenge of identifying qualifying SMEs, particularly with fluctuating market valuations, was too daunting a task. The Commission decided to take the path of least resistance: throw out the transparency thresholds for all issuers in the name of cost-efficiency.

The reality of the situation is that cost of regulatory compliance is extremely reasonable, especially when weighed against its capital market benefits. These include greater visibility and liquidity, less volatility, and higher trading volumes, all of which are likely to contribute to a lower cost of capital.

Services such as Business Wire offer flat rate annual packages that are very competitively priced, enabling issuers to effectively control costs, while ensuring broad, simultaneous distribution to the full range of market participants.

Under the Commission’s proposal, companies can still file quarterly reports and interim management statements at their own discretion. There is no longer a mandate for companies to do so. The investment community, and the financial markets, will be ill-served by the Commission’s short-sighted decision.

Ironically, many observers think that the majority of companies will continue to update the marketplace on a regular basis. Most companies recognize that to limit market communication to semi-annual updates simply doesn’t make sense. The value of an effective investor relations program that, by definition, includes regular updates on corporate developments, has been well documented by independent academic studies.

So while many market professionals anticipate minimal consequences from the Commission’s decision, it clearly sends the wrong message to the marketplace.

The global markets remain as fragile as ever, with investor confidence teetering as the world holds its breath waiting to see how the European debt crisis plays itself out.

A major lesson learned from the 2008 financial markets meltdown has unfortunately been quickly forgotten by some market regulators.

Information is the lifeblood of our financial markets. Stanching its flow, in the name of relieving the “administrative burden” on listed companies, is a tremendous disservice to the investment community, and needlessly substitutes risk for reassurance.

With the European Union seemingly on the brink, the European Commission’s proposal to dial back on disclosure sets a dangerous precedent that desperately needs to be reversed.

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Posted by Monika Maeckle

NASDAQ as SRO: An Oxymoron

October 10, 2011
by Neil Hershberg, Senior Vice President Global Media
 
Neil Hershberg
Neil Hershberg, SVP – Global Media

As a “Self-Regulatory Organization,” NASDAQ is proving to be a poor role model in terms of policing its own policies.

NASDAQ has twice promised the SEC that it would refrain from the unfair and controversial practice of “bundling” its IR Services, e.g. wire distribution and IR web sites, with its listing fees. Yet despite these repeated assurances — concessions made to extract approval of several hefty listing fee hikes — NASDAQ has continued to engage in its anti-competitive practices, blatantly ignoring its compliance commitments.
 
Hence, today’s problematic paradox: in its pedestal role, NASDAQ seeks to portray itself as a bastion of free enterprise, and patron of fair and open competition. When it comes to its own commercial dealings, however, NASDAQ clearly doesn’t practice what it preaches. NASDAQ’s self-serving actions confirm that it is anything but the paragon of capitalism that it purports to be.
 
And, in an act of unquestionable hubris, NASDAQ is now asking the SEC to approve its predatory practices:
 
http://www.sec.gov/rules/sro/nasdaq/2011/34-65324.pdf
 
NASDAQ is apparently seeking to parley the SEC’s recent approval of a change in the NYSE’s Listed Company Manual to rationalize its own proposed rule change. In reality, NASDAQ’s filing is its latest gambit to distort the dynamics of the marketplace, and to leverage its subsidiary holdings to gain an unfair competitive advantage.
 
The key difference between the SEC’s newly approved Section 907.00 in the Big Board rule book and NASDAQ’s rule change request is that the NYSE is recommending independent vendors to its listed companies. Conversely, NASDAQ’s proposal is entirely predicated on its sibling subsidiary’s wholly-owned service offerings, which collectively operate under the “Corporate Solutions” banner. Once the complimentary period expires, all future profits will go straight to NASDAQ’s parent company’s bottom line.
 
This systemic vertical integration provides NASDAQ with the pricing flexibility to artificially manipulate the pricing structure of its offering to the detriment of the entire IR services industry. It makes a mockery of the principle of fair competition, which is especially troubling given NASDAQ’s perceived Olympian stature in the free enterprise system. 
 
Does the SEC really want to be seen as sanctioning NASDAQ’s “stacked deck?”  We certainly hope not, as Americans’ confidence in the nation’s financial system is already seriously challenged.
 
NASDAQ’s opportunistic overture strains credibility on several levels.
 
NASDAQ trumpets that issuers are not obligated to take advantage of its complimentary services; the clear implication is that competition won’t be compromised.
 
Yet, NASDAQ itself says it is compelled to offer NYSE-listed companies complimentary services because the Big Board offers comparable services.
 
This is a tacit acknowledgment that companies are reluctant to forfeit these free services; instead, these “no-cost” services are a powerful incentive for issuers to remain with their current providers.
 
In other words, NASDAQ’s claim of open competition exists in name only.  Budget-conscious issuers are extremely unlikely to pay for services that are freely available. And that means that rival IR service providers are unfairly elbowed out of the process. NASDAQ’s strategy seeks to divert the IPO pipeline to its sister service providers, effectively stanching the future lifeblood — and growth potential — of the IR service industry at large.
 
Furthermore, NASDAQ attempts to rationalize its rule change request by saying that a comparatively small number of issuers will be eligible to participate in the program. This is a vacuous argument that is indicative of NASDAQ’s cynicism in raising the bundling issue in yet another guise.
 
NASDAQ’S rule change request is its latest ploy to “tie” its corporate services to listings.  The SEC has repeatedly rebuffed NASDAQ’s past efforts at bundling its services. NASDAQ’s recycled proposal seeks to provide a cloak of legitimacy to an anti-competitive practice that has failed to survive previous SEC scrutiny.
 
The SEC’s decision should not be influenced by NASDAQ’s understanding of the number of affected companies; rather, its decision should be solely based on the merits of NASDAQ’s proposal. And if market fairness is the one of the ultimate criteria, then the evidence clearly dictates that NASDAQ’s rule change should be rejected.
 
Following is the text of Business Wire’s comment letter to the SEC on NASDAQ’s rule-change proposal:
 
http://www.sec.gov/comments/sr-nasdaq-2011-122/nasdaq2011122-1.pdf
 

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Posted by Monika Maeckle

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.

2 Comments | Disclosure, Investor Relations, Reg FD, SEC | Tagged: , , , , , , , , | Permalink
Posted by Monika Maeckle

Why the Deck is Stacked Against Retail Investors

February 3, 2011
by Neil Hershberg, Senior Vice President, Global Media
Neil Hershberg

Neil Hershberg, SVP - Global Media

The classic Cole Porter musical, “Anything Goes,” is returning to Broadway this spring.

Retail investors won’t have to wait that long. In practice, “Anything Goes” has become the unofficial mantra of Wall Street, the Digital Age’s equivalent of ‘The Wild West” when it comes to disclosure.

Unfortunately for individual investors, who invariably get the short end of the stick, the folks in a position to end today’s information free-for-all have yet to take action.

At the risk of sounding like the Cassandra of capitalism, here’s why retail investors are swimming upstream:

1. Reg FD’s “level playing field” has become the regulatory equivalent of an ecological disaster area; it is eroding faster than many storm-swept East Coast beaches.

Mega-cap companies with huge investor followings have, for reasons best known to themselves, opted for micro-disclosure, dispensing with broadly disseminated news releases in favor of standalone web postings or similar truncated practices.

Rather than providing simultaneous, real-time information access to all interested investors, these best-practice contrarians have essentially decided to ladle access on a sequential basis to anxious  investors clamoring for corporate updates.

Over the past few decades, we’ve regressed from “trickle down economics” to “trickle down disclosure.”  Unfortunately, retail investors are the ones getting hosed.

Ironically, technology trend-setters are among the most flagrant abusers of acknowledged best-practice disclosure practices. These industry leaders should know better than anyone the inherent technical limitations of the Internet, and why the web’s architecture makes it impossible to meet the complex challenge of simultaneity.

2. Retail investors also are unknowingly getting eaten alive by spiders; these automated creepy crawlers have become a hidden epidemic.

While Bloomberg recently generated headlines when it published Disney and NetApps earnings results in advance of their official release, the real concern for retail investors should be the stealth spidering tactics of traders deliberately seeking to stay under the radar.

The spiders unleashed by Bloomberg and Selerity likely have plenty of company. In all probability, armies of incognito spiders are clandestinely retrieving troves of actionable, non-public data for their trading masters.

Even if these spiders fail to uncover non-public material information, their very use provides an unfair edge if publicly traded companies do not broadly disseminate their news via a service such as Business Wire.

The reason is that spiders are faster than the RSS readers that retail investors rely on for news alerts when disclosure is limited to a standalone web posting. Whereas Business Wire distributes market-moving news simultaneously and in real-time to financial information systems, portals, and media platforms worldwide, standalone web postings create a feeding frenzy for these rapacious spiders.

Retail investors have a legitimate reason to be suffering from arachnophobia; they are at a distinct disadvantage to market players that control these powerful technology termites.

3. There is a well-known saying that in life, “timing is everything.” That is certainly the case on Wall Street, where latency and milliseconds rule the day.

Winning on Wall Street is largely contingent on the ability to access and act on information faster than anyone else.

Institutional investors clearly have the necessary resources and technology at their disposal to triumph in today’s trading environment.

Notice-and-access and web disclosure disproportionately favor the professional investor, who can read – and react (perhaps even robotically) – far more quickly than the average retail investor.

The trading activity following Netflix’s recent web posting of its earnings (January 26 at 4:05 pm/ET) illustrates the high stakes involved.

More than one-third of Netflix’s total share volume for the day, or just over three million shares, traded after Netflix posted its earnings.

In after hours trading, Netflix’s shares were up $19.16 (10.47 percent).

Although individual investors now have the opportunity to trade in the after-hours market, they are being steamrolled by institutional traders, who clearly have the capability to react with more immediacy.

Retail investors are forced to play a bad hand. A recent blog post by Jack Campbell at 24/7 Wall Street, “Ten Ways Wall Street Crushes Retail Investors,” elaborates on many of these same themes: http://247wallst.com/2011/01/26/ten-ways-wall-street-crushes-retail-investors/

The common denominator linking all these examples is access to material information.

Regulation Fair Disclosure, in its original iteration, is clear on this point: all investors should have equal access to information at the same time.

The answer to the disclosure dilemma is obvious: the integrity of Regulation Fair Disclosure must be restored if retail investors are to be equal market participants.

Simultaneous, real-time access to disclosure news is the only solution that will put an end to the emerging two-tier access system that is slowly taking root.

It’s time for retail investors to get the fair shake they deserve.

3 Comments | Disclosure, Investor Relations, Reg FD | Tagged: , , , , , , , , , | Permalink
Posted by Phil Dennison, Senior Marketing Specialist, Business Wire

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