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?”

The SEC’s Interpretive Guidance on the Use of Company Web Sites: A Reality Check

August 8, 2008

In Business Wire’s response to the Securities and Exchange Commission’s (SEC) Interpretive Guidance release on the use of company web sites, we cite some very real concerns that the commission’s report did not effectively address. From security issues to simultaneity, the release provides no enhancements to the current disclosure model for material news and in fact introduces quite a bit of ambiguity with regards to disclosure.

Today, Reuters did an analysis piece on the issue that’s a good read. This excerpt cites a member of the SEC’s own Advisory Committee on Improvements to Financial Reporting (CIFR) which provided guidance to the SEC for this ruling:

“The advisory committee’s report says its recommendations on increased website usage are “not intended to affect the valuable role that newswires and other news vehicles play in disseminating important company information,” said advisory committee member Edward Nusbaum, chief executive of auditing firm Grant Thornton.

And this, citing a former SEC director who now advises companies on corporate governance:

“The SEC’s report outlining the guidelines says there are “very limited circumstances” where the Internet could be the sole way to disclose information, and urged companies to take additional steps to notify investors. No matter what the rules are, some people will abuse the system, said David Martin, co-chief of the corporate practices division at Covington & Burling LLP and former director of the SEC’s Division of Corporation Finance. “Am I going to say to my clients, ‘Play “Where’s Waldo” with this information?’ No,” said Martin, who advises companies on corporate governance.”

One thing we know for sure, the vast majority of public companies embrace the concept of full and fair disclosure, creating a level playing field for all investors, regardless of their technical sophistication in accessing news. Business Wire provides a secure, trusted platform for both news issuers and recipients. Authenticated content, issued with sub-second simultaneity via patented technology to all market participants, in a variety of formats so that tables and content are rendered properly in each setting.

For each individual issuer to replicate that level of distribution on their own is unrealistic. For end-users such as investor services, content aggregators and news services to accommodate the varying formats and technologies of individual issuers is also simply unrealistic. To say that RSS or Atom feeds do the same thing is naive at best and dangerous to a fair and open market at worse.

Business Wire works with tens of thousands of companies each year to accommodate their specific requirements in the dissemination of material news. Ask any of our professional editors if that process is turnkey. It certainly is not. They coordinate translations, fix formatting problems, catch typos and add keywords which are essential to the sophisticated coding systems/engines powering today’s information platforms.

We work with market regulators, exchanges, news services, content aggregators and a wide range of media to ensure our news feeds are received, parsed and displayed properly. Ask any of our development staff or the staffs of the vital sources of news if that process is turnkey. There is no such thing as “one size fits all” technology that would make the display and use of content work for the different technologies used by the thousands of recipients we accommodate. Our editors and our patented NX network accommodate the varying needs of these sources.

As we’ve moved from ANPA-based content to XHTML-based content, the push towards adoption of wider earnings tables by end-users has been a years-long process. With XBRL mandates on the horizon, Business Wire stands uniquely ready, with the experience and technology, to help issuers and recipients adapt to that reality. Don’t know ANPA, XHTML or XBRL? If you hope to push content out effectively, better start studying.

As for RSS and web postings, they are very important components of effective outreach. But they are just components. For example, Google scrapes sites for news. It doesn’t host news content. So, if you issue your release just after a scrape of your site, there’s going to be a delay in it showing up in Google searches. And if that’s your core method of distribution, you’ve got some unhappy shareholders that didn’t get your news or have to trade based on what external voices are saying about you in those search results.

The sources individuals trust to get their news continues to fragment. The cool thing about Business Wire is we are constantly working with new sources and technologies to ensure our news feeds are included in their offerings. To flip the model and say the onus is now on the individual to seek out and authenticate material news from public companies doesn’t make sense. Individuals already can create their own custom feed of content using RSS and Atom, but they don’t have to do that. They can also rely on their favorite website or investor service to do that for them, simultaneous to what professional investors see.

J. Robert Brown of the legal blog “The Race to the Bottom” has an interesting take on the SEC release as well, calling it a “great disappointment, containing nothing that the average security lawyer doesn’t already know.” The blog discusses how so much of the release’s offerings on a company’s ability to adopt different technologies and procedures for disclosure “depends upon the facts and circumstances.” Ambiguity, not clarity.

Finally, the failure to address the very real security issues that would naturally flow from the sole use of a company web site for disclosure postings is also troubling. This is particularly crucial in light of this week’s headline news about the FBI breaking a major international identity theft ring. On the identity theft case, they show how advanced and adept individuals can be (and how they can network together quickly) to exploit security weaknesses. On the SEC guidance, however, they are silent on the issue. To think that hackers and others won’t attempt to exploit public companies looking for unreleased, pre-posted material news is naive. Just read today’s news headlines to get a glimpse at the creativity of those seeking to gain unfair financial advantage.


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