After seven years and a chilly greeting, investor relations officers (IROs) have settled into the rules that govern corporate disclosure for public companies, Regulation Fair Disclosure or Reg FD. IROs are now seeing the benefits of the laws and have seamlessly integrated the policies into the work that they do.
Reg FD legal guidelines are the rules that communications professionals, executives, and others who speak on behalf of the financial status of a public company must follow. The goal – to prevent large investors with an inside track from getting an inside scoop before smaller investors, and, therefore, an unfair trading advantage. Reg FD mandates that information be widely disclosed for all through earnings reports, webcasts, and other forums.
“Reg FD has clearly accomplished a great deal of what it set out to do in terms of leveling the playing field and getting much better access to corporate information,” says Jane McCahon, IR counsel at Conway Communications.
McCahon spoke at a National Investor Relations Institute conference in September, looking back on the initial fears that Reg FD instilled in the IR community.
“The biggest fear with Reg FD was that the dialogue and give and take was going to dry up,” said McCahon. “Many say that has happened to some degree.”
But, for many more, it appears that fear has been largely unfounded. Rather, there have been a number of time-proven benefits of the regulation.
“It really empowered an IRO to push back when people were asking for that kind of non-public material,” says McCahon. It has [also] given an IRO the standing and the regard within a company to become the disclosure manager.”
In addition to the respect that IROs now enjoy, it created an ethical code that companies had to follow.
“Selectively disclosing information to your investors or your analysts was bad policy to begin with,” says Gordon McCoun, senior managing director of IR at FD. “The success of Reg FD is that it brought companies on the margins closer to what best practices should be.”
The consequences for poor communications practices have also prompted companies to be more strategic with how they disclose information.
“Rather than just talking extemporaneously, you think about upcoming presentations that are going to be webcast,” adds McCoun. “It injects a greater level of awareness of what we're saying [and] to whom we're saying it.”
Furthermore, the strategic approach is one that has to permeate throughout the organization. Communications and its value to the overall brand are highlighted by the need to stick to properly disclosed information.
“It's served as a catalyst for companies to better align their communications internally and spark dialogue between internal communications, corporate communications, and IR,” says Michelle Loguidice, a director and IR practice leader at Brunswick Group. “You're seeing messages going out to all stakeholders that are more aligned and more reflective of company and corporate culture.”
At first blush, it appeared that Reg FD was calling for a complete rethinking of IR and communications policy. However, now that it has been put to use and analyzed, what seemed a radical departure from practice was actually just a fine tuning.
“When Reg FD first came out, we had a lot of clients that said, ‘OK, we'll stop communicating,'” says Adam Miller, president of Abernathy MacGregor. “Now I think communications has gone back, in large part, to being what it was pre-Reg FD. People have figured out a way to communicate in line with Reg FD so they're not imparting meaningfully less information than they were [before the regulation].”