by Michael Becker, Senior Vice President, 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.
by Neil Hershberg, Senior Vice President, Global Media
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.
TRUNCATED TRANSPARENCY: The JOB Act’s Compressed IPO Cycle and its Hidden Implications for Market FairnessApril 27, 2012
by Neil Hershberg, Senior Vice President, Global Media/Business Wire
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.
For publicly listed companies, transparency is not an option — it is an obligation.
by Neil Hershberg, Senior Vice President, Global Media
The 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.
As a “Self-Regulatory Organization,” NASDAQ is proving to be a poor role model in terms of policing its own policies.
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.
by Neil Hershberg, Senior Vice President, Global Media
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.