In its recent Interpretive Release, the SEC addresses links to third-party information from a company web site. This new guidance applies only to the liability a company might face for purposes of the antifraud provisions of the federal securities laws. This guidance in no way alters their position as it relates to the Securities Act.
Rules in the Exchange Act may hold a company liable for third-party information that it links to from its web site if it could be attributable to the company. In the 2000 Electronics Release, the SEC stated that such information can be attributable to the company if either the company was involved in the preparation of the information, or if the company explicitly or implicitly endorsed or approved the information. Not surprisingly, it is the “implicitly” that makes company lawyers nervous.
The three factors delineated at the time by the SEC, context, confusion, and presentation, left plenty of room to be nervous. So, there is some new guidance to answer the principal question:
“Does the context of the hyperlink and the hyperlinked information together create a reasonable inference that the company has approved or endorsed the hyperlinked information?”
Here is where it gets scary. The SEC states that they “begin with the assumption that providing a hyperlink to a third-party web site indicates that they company believes the information on the third-party web site may be of interest to the users of its web site.” Further, the SEC states that “The degree to which a company is making a selective choice to hyperlink to a specific piece of third-party information will likely indicate the extent to which the company has a positive view or opinion about that information.”
I know what you are thinking. You’re thinking, “No problem, we’ll just put a notice that we don’t endorse the information and we’re done.” Unfortunately, that is not going to work. The SEC states that a disclaimer or “exit notice” alerting users that they are leaving the company web site and accessing an unendorsed web site is not sufficient. One example cited is a company that links to only one stock analyst web site and that site happens to have positive information while other analysts who might be more negative are not linked.
So, where does that leave our IR web pages? First, while notification is not a free pass, it is still useful in making sure that web site users are aware of when they leave the company web site and that where they are going is not endorsed by the company. To achieve this, an “exit notice” for every off site link on the Investor Relations pages is a must. No, it doesn’t let the company off the hook, but it does let the investor know what is going on and is the first step in making sure there is no endorsement.
The second task is a little more complicated. The fewer links that exist in any one area or page, the higher the probability that those links can be considered selective. On the other side, the lower the quality of the site or page being linked, the higher the probability of that link being considered misleading.
Your best bet then in providing links is to follow some basic ground rules. First, when it comes to analysts and research, never link to just one. Always have multiple links. A good way to get multiple links without having to worry about quality is to link to the big independents like Thompson or Morningstar if they have research about your company. Finally, determine if the links really belong on the Investor Relations page or if they would be better located elsewhere. Links from the IR page will take on a heavier weight than those on other areas. If the company wants to showcase recent charity work, link from the Community Involvement page or the Recent News page.
Again, none of this is earth shaking news, but a couple ounces of prevention is always worth a pound of cure.
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