As mentioned here previously, the Securities and Exchange Commission recently released an “Interpretive Release” regarding SEC guidance on the use of company web sites. The document totals 47 pages and can be found here in its entirety.
As reported in my prior post the release is intended to address four specific parts:
- Clarification of how information posted on a company website can be considered “public” and guidance on complying with Regulation FD.
- Clarification of the liability framework for certain types of electronic disclosure. Of note, is that companies cannot require users to waive any protections from federal securities laws as a condition of participating in forums or blogs. Also, included is guidance on linking to third party information without having to “adopt” such information. How companies can provide historical data without it being considered “republished.”
- Clarification of how anti-fraud positions apply to postings by the company or on behalf of the company in blogs and forums.
- Clarification of which information is not generally subject to the Sarbanes-Oxley Act regarding “disclosure controls and procedures.”
- Clarification that information may not need to satisfy the “printer friendly” standard in some cases, which would free companies to use “dynamic” technologies.
We’ll start by breaking down the release into each attempted clarification. It should be noted that in addition to being an interpretive release, the document is also a Call for Comment. As such, those involved in the production and maintenance of Corporate Websites and the Investor Relations section thereof, should carefully study the release in order to make relevant comments to the SEC. Such comments are the best way to influence the course of any further action or clarification.
Part 1 Section 1
The first 15 pages of the release primarily cover prior actions by the agency. So, we’ll jump right in at the first section of “new” information entitled: “Application of Certain Provisions of the Federal Securities Laws to Information Presented on Company Web Sites”
The first section is: “Whether and When Information Is “Public” for Purposes of the Applicability of Regulation FD”
Now, let me just say that if you are looking for some straight forward, “Do this”, but “Do not do this”, then you have the wrong document. Still, there is some valuable information in here for those charged with maintaining company websites and compliance with regulations.
The information in this first section pertains mostly to when information that is posted on a company’s website can be considered “public” for compliance with Regulation FD. Specifically when disclosure of information in a private manner to a specific individual or group of individuals can be considered acceptable based on the information having been public. In order to be considered “public” information must be “disseminated in a manner calculated to reach the securities market place in general through recognized channels of distribution, and public investors must be afforded a reasonable waiting period to react to the information” (see note 1)
The catch here has long been whether or not the company’s website constitutes a “recognized channel.” As the SEC notes, they have stated previously that such a website could someday be a recognized channel. Is today that day? Well, sort of.
The SEC notes that in order to be a recognized channel, investors must know the website’s location, that the company should let investors know that it does now, and intends in the future, to publish important information on its website, and that such information be easy to find, as well as the information be made available for a long enough period of time before any subsequent non-public disclosure.
So, how does a company go about making its website a recognized channel. Ah, welcome to the gray area.
That is where we are headed next.
Note 1: From page 18 of the release, which cites Faberge, Inc. in footnote 48.
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