SEC rules force the holding companies to change tack

NEW YORK: Acting on the advice of legal counsel, several of the major marketing holding companies - including WPP, Omnicom, Interpublic Group, Grey Global, and Publicis Groupe - are likely to forbid any of their component agencies from releasing individual results.

NEW YORK: Acting on the advice of legal counsel, several of the major marketing holding companies - including WPP, Omnicom, Interpublic Group, Grey Global, and Publicis Groupe - are likely to forbid any of their component agencies from releasing individual results.

In the past, these figures have been submitted to the Council of PR Firms and used in compiling PRWeek's annual agency rankings. The companies are also forbidding their other operating units, including their ad agencies, from providing such figures to their industry publications. Their fear is that the agency numbers may put them in jeopardy of violating new SEC financial disclosure rules.

WPP and IPG both confirmed their new stance with PRWeek. Grey Global said a final decision has not been made, but it will likely follow suit.

Spokespeople for Omnicom and Publicis did not return calls by press time.

"We are working very hard with the companies to see if we can find a way to still have a listing," said Kathy Cripps, president of the Council of PR Firms.

In last year's rankings, nine of the top-10 firms were owned by a marketing holding company.

The holding companies are responding to changes in disclosure regulations brought about by the corporate reform law passed by Congress last summer known as the Sarbanes-Oxley Act. A Sarbanes-Oxley-related regulation adopted by the SEC in January was designed to curtail financial disclosures that do not adhere to the accounting standard known as the Generally Accepted Accounting Principles (GAAP).

One of the companies' gravest concerns is that the figures provided by the agencies would deviate from what they report in public SEC filings, and would therefore constitute a non-GAAP disclosure.

"If you add up the figures the agencies provide with what the companies report (in public filings), you often get two results," commented a source close to one of the holding companies.

Under SEC rules, the holding companies would be obligated to reconcile such a disparity.

A WPP spokesman read a statement that said lawyers had informed the company it "could be in violation of the spirit and perhaps letter of the law," if it supplied the agency figures. IPG provided a similar statement that stated in part, "Every publication has its own reporting methodology, none of which conforms to GAAP," citing a potential violation of the disclosure rule.

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