SEC regulations affect comms future

With the convergence of PR and investor relations, PR pros working for publicly traded companies need to be sensitive to changes in regulatory compliance requirements.

With the convergence of PR and investor relations, PR pros working for publicly traded companies need to be sensitive to changes in regulatory compliance requirements.

The US Securities and Exchange Commission recently issued an interpretive guidance release that potentially affects all corporate communicators who deal with “material” (market-moving) information. PR pros need to be knowledgeable about the SEC's current thinking.

Unfortunately, the SEC guidance paper lacks clarity on the key point of public disclosure; it has generated considerable confusion in the marketplace as to the SEC's real intent.

According to Regulation Fair Disclosure (Reg FD), listed companies are obligated to distribute material news to all market participants equally. Reg FD was implemented to do away with market abuses that allowed privileged investors – with advance access to corporate decisions – to trade before the market at large had the opportunity to digest the same news.

Reg FD is widely seen as an unqualified success. The advent of simultaneous, real-time disclosure platforms enables all investors to have equal and unrestricted access to price-sensitive corporate developments.

The SEC's Interpretive Guidance Release discusses appropriate uses of corporate Web sites for communicating material information, yet provides only abstract information as to the very limited conditions which might qualify. The absence of definitive guidance with regard to security, timing, simultaneous availability, and legal terms of use of the company's material information all become critical issues in any serious discussion of full and fair disclosure.

Rather than reinforce shaky public confidence in our equity markets, the agency's musings on the uses of corporate Web sites for communicating material information might have the reverse effect. The absence of assurances that access to material news is simultaneous, and in real time will lead to investor inequality and market inefficiencies – troubling trends for skittish retail investors.

In Business Wire's view, any hint of endorsement for the use of Web sites to communicate material news compromises the true intent of Reg FD. It is also out of step with the clear direction of the global financial markets; regulators in Europe and Asia are embracing what is often called the “North American” disclosure model, and adapting the paradigm for their own jurisdictions. The bottom line is today's disclosure framework works extremely well and shouldn't be tinkered with.

Web proponents have a valid argument with their assertions that RSS feeds, corporate Web sites, and blogs should play a major role in a listed company's IR strategy. Business Wire is in agreement that these powerful distribution channels should be part of every IRO's communications arsenal. They are welcome adjuncts – not standalone alternatives – to a proven disclosure platform.

For today's PR pro, the reality is that keeping abreast of regulatory changes is on par with tracking the latest new media applications.

Neil Hershberg is SVP of global media at Business Wire.

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