Corporate Eye

SEC Interpretive Release Part 2 – Antifraud

One of the SEC positions taken in 2000 when they addressed company web sites was that companies are responsible for the accuracy of statements made on their websites that could reasonably be expected to reach investors or securities markets.  This in turn makes statements made on a company’s website subject to antifraud provisions of federal securities laws.  Noted specifically is Exchange Act Section 10(b) which prohibits making material misstatements and omissions of fact.

The Good News

In the 2000 Electronics Release, the SEC noted possible liability arising from accessing previously posted material on a company’s web site.  The SEC notes that “some companies” continue to be concerned about whether or not previously posted materials that are accessed later by web site users would be considered “republished”.  In 2005, the SEC addressed this issue, but only in the context of registered offerings under the Securities Act.  Now, it seems, the SEC is ready to put this issue to bed.

The Interpretive Release states that the SEC does not believe that “companies maintaining previously posted materials or statements on their web sites are reissuing or republishing such materials or information for purposes of the antifraud provisions of federal securities laws just because the materials or statements remain accessible to the public.”

Yippee!  A straight answer!  Maintaining historical materials on a company website is not considered republishing.  There is a catch, however.  In circumstances where it is not apparent to a reasonable person that materials are from an earlier date then things might be different.  So, previously posted materials should be identified as historical by dating them.  Most companies tend to do this already.  But, also, the SEC recommends that such materials be “Located in a separate section of the company’s web site containing previously posted materials or statements.”

Investor Relations Web Site Best Practices

Not all companies were taking the hard line approach discussed by the SEC in regards to posting historical materials on their web sites, but none the less, the elements contained within the Interpretive Release give some guidance as to how the IR portion of the web site should be constructed.

In addition to the items outlined from the first section of the release, we have two new items to add to the best practices list.

First, all items should be dated.  For the most part, all official materials are already dated.  However, by making a date a requirement for anything posted to the IR pages, a company can ensure continued compliance particularly with materials that are “current” today, but will be “historical” sometime in the future.  An existing date when the material is first published eliminates the possibility that materials will inadvertently be archived without a date later.

Second, all historical or archived materials should be kept in a separate area.  Though not explicitly stated, a separate page with a large “ARCHIVE” or “HISTORICAL” heading across the top will be a great way to prevent any “reasonable person” from being unable to distinguish between new and old materials.

Chances are most IR web sites are at least somewhat on board with these issues already, but for those that aren’t, your reason to make some changes has arrived.

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Brian is a small business owner, consultant and freelance writer. Brian began his professional career in the computer industry as a consultant where he became keenly aware of the internal workings of companies from Fortune 100 giants to small two-man shops. While working with a mutual fund company, Brian developed a strong interest in finance and became a Certified Financial Planner. As a financial professional, Brian specialized in working with small business owners. Brian is the co-founder of ArcticLlama, LLC a premier business writing and consulting firm. He also runs a real world personal finance blog. Brian lives in Denver with his wife and daughter.