Marketing Roadmaps

Blogs and SEC Disclosure

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Interesting developments recently on the public company material disclosure front.

Sun CEO Jonathan Schwartz has been pretty vocal that he believes blogs and Web sites are better than "anachronistic" vehicles like press releases and conference calls to broadly disseminate material information.  He recently wrote a letter to SEC Chair Christopher Cox asking for clarification of Regulation FD (Fair Disclosure), the rule that requires disclosure methods to be "reasonably designed to provide broad, non-exclusionary distribution of the information to the public."

Cox’s  reply, posted in a comment to another post on Schwartz’s blog a little over a week ago, indicates that the SEC is open to the idea:

"The Commission encourages the use of websites as a source of information to the market and investors, and we welcome your offer to further discuss with us your views in this area. Assuming that the Commission were to embrace your suggestion that the "widespread dissemination" requirement of Regulation FD can be satisfied through web disclosure, among the questions that would need to be addressed is whether there exist effective means to guarantee that a corporation uses its website in ways that assure broad non-exclusionary access, and the extent to which a determination that particular methods are effective in that regard depends on the particular facts." (emphasis mine)

In other words, does the site have a broad reach? Is it open to all? And most importantly, is it GENERALLY true, not just specifically true in certain instances.

This last is the key one, in my opinion. Sure, Sun’s site and Jonathan’s blog are widely read, and would likely qualify under the FD Regulation. But in order for web disclosure to become a rule, it would have to be generally and broadly true for all public companies, not just some. That’s the much harder test.

So, don’t cancel your PR Newswire or BusinessWire accounts just yet, folks. I suspect we are going to need the old, beleagured press release for a bit longer.

Thanks to John Cass and Robert French. Also, more details in this AP article.

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Today’s trivia:

  • Schwartz is a fellow alum of Wesleyan University.

  • Today is the 2d birthday (anniversary) of this blog.

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Comments

  2. Thanks for the comment and the link to the article.

    I do think blogs and Web sites have potential as disclosure vehicles, provided they have sufficient reach. The issue the SEC has to grapple with, and it looks like they finally are, is how to define a rule.

    To accept blogs as a mechanism for material disclosure, it won’t be sufficient for some blogs, like Jonathan Schwartz’s, to have reach and deliver media results like those described in your article.

    We have to be reasonably assured that ALL blogs used as material disclosure have the necessary reach. Otherwise we create opportunity for abuse far worse than attempting to bury bad news by releasing on a Friday afternoon.

    Which is of course what the SEC regs are designed to prevent, and why they move so slowly and deliberately on this stuff.

  3. Reach and readership are two different things. All blogs/rss feeds have the same reach in theory, just not the same level of readership. But that’s how it is today with news releases, and how it always will be.

    All you have to do to replace disclosure releases is appoint a single RSS feed as a company’s official disclosure feed. That feed will be picked up faster than you can imagine.

  4. Dominic, you may be right. And I have no stake or interest in the newswires other than that I find them useful tools. If an equally good competitor can meet the widespread dissemination test (blog, Web site or whatever comes next), great.

    RSS may be that competitor. But last I looked, RSS use, while increasing, was still far less than I personally would expect to be sufficient to pass the test.

    This is not a simple issue. SEC regulations exist to protect the public from corporate malfeasance. If they do decide to allow blogs and online sites to be vehicles for material disclosures, they have got to close any possible loopholes.

    Which is pretty much what I got from Cox’s letter — they are willing to consider it and are now ready to do the investigation. Has it taken longer than some would like? Maybe, but hey, take what you can get.

    One last comment — I’d like to see an apples to apples comparison of blogs and “old media.” While it raises some interesting questions, your article compares two dis-similar things — a comment on Schwartz’s highly read blog about a topical issue and a regular SEC communique. What would be quite interesting would be for a company to release something simultaneously through a newswire and on its blog, and track those results.