If you’ve had a chance to go through the 47 page guidance and specifically the section regarding “dissemination” of information and what “public” means in the context of RegFD and the corporate web site you’ve likely been left scratching your head thinking “ok, so now what?”The issue of what constitutes public information is one of the grey areas of the latest guidance. The purpose of this post is to try and provide some additional color to the guidance and help you understand what it is going to take in order to use your website as your “public” channel of disclosure under this new guidance.

To be considered “public” the corporate site needs to meet 3 criteria.

1. a company web site is a recognized channel of distribution
2. posting of information on a company web site disseminates the information in a manner making it available to the securities marketplace in general, and
3. there has been a reasonable waiting period for investors and the market to react to the posted information.

For the purpose of this post I’m going to focus on the first two criteria.

From the guidance:  Whether a company’s web site is a recognized channel of distribution of information depends on the steps that the company has taken to alert the market to its web site and its disclosure practices, as well as the use by investors and the market of the company’s web site

In general, for you to use your site as the main channel of disclosure it requires that you act like it is the main channel and that the market recognizes it as such. This means that you need to change the behavior of your company along with the perception of the market – which is going to take some effort. Here are a handful of suggestions (along with language from the guidance) for you to get started with:

Plan to transition to a web disclosure model over the next year. As you just read, this is about the market seeing your corporate site as the main channel of disclosure and knowing that your web site is the first place to go. This means you’re going to have to work and changing the market perception along with (likely) making improvements to your site.  Setting a timeline over the next 4 quarters will allow you to establish some clear milestones and to use traditional means (see below) to condition the market to go to your corporate web site for disclosure.

Act as if your site is your only method of disclosure – even while using all traditional methods. Treating your website as the main channel for disclosure is the first and most obvious step to take. And it’s also the one that takes the most sustained effort. More on improving your web site below. In addition to this, reference your web site in all of your disclosure such as press releases, reports, webcasts, presentations etc.  Routinely post critical information to your web site in a prominent location. Ensure your disclosure and methods of subscription are front and centre on your site – push people to sign-up for email and/or subscribe to RSS feeds.  Look to the leaders in the industry, site’s like Sun Microsystems and others – how can you get closer to these standards?

From the guidance: Whether and how companies let investors and the markets know that the company has a web site and that they should look at the company’s web site for information. For example, does the company include disclosure in its periodic reports (and in its press releases) of its web site address and that it routinely posts important information on its web site?

Transition the market to go to your web site as the starting point. Here is a suggested path to transitioning to web disclosure.

1. Include links to your site in all reports, press releases, etc., condition the market to come to your site
2. Make RSS, Email alerts and other subscription features prominent – own your list (don’t let the newswire do this for you)
3. Move to a Notice and Access model for the distribution of your news - send notices via newsires, not news - see the Notice and Access model just posted by IR Web Report for a great model to follow
4. The notice and access model may be the end point for a while until new methods emerge or your company is very well followed  

From the guidance: Whether the company has made investors and the markets aware that it will post important information on its web site and whether it has a pattern or practice of posting such information on its web site;

Use the Internet standards of distribution like RSS and Email alerts to connect with the market and get your message out. Use RSS, Email alerts and other options as they emerge to get your content out to the Internet and into the hands of the market.  Add rich content to your IR site, think of yourself as an investor – what are you looking for. Work with your vendors, push them to improve their products and help you achieve more –it’s a competitive industry and we all want to help.

Subscribe to the RSS feeds of your peer companies - start using RSS today and see what a difference it makes in staying connected. By using RSS you’ll want to have this on your site tomorrow and you’ll see the potential of using it to drive your disclosure.  Subscribe to the feeds from IR experts and from vendors, keep an eye on what’s happening in the industry and what the options are for you to do things better.

Why should you move to a web disclosure model?

From the list above you may be thinking “looks like a lot of work” and the reality is that it will take a commitment from you and your vendors to building the new standard of disclosure. The SEC has opened the field for innovation to drive the market. Being a part of it has a number of benefits:

Gaining complete control over your disclosure and establishing a direct connection to the market. In today’s world you have very little knowledge as to who is interested in your disclosure. Yes there are media monitoring services out there, but these provide an aggregate view of the market’s interest. The more you are able to use your web site as the podium for your disclosure you will find your subscriber lists growing and your understanding of the market improving by having a direct connection, rather than through intermediares.

Reduce or eliminate newswire distribution costs. Although newswires will provide a long list of reasons for why you should continue to pay for the distribution of data (such as editorial quality, catching errors, availability, and their long list of distribution options) you know that there is a finite universe out there that needs to know about your disclosure.  You also know that your internal processes (due to SOX) now force you to check, recheck and obtain extensive internal approvals on material information and the newswires can’t help you there. The SEC guidance now makes it possible to move to a “notice and access” model and drastically reduce the size and number of press releases you put out over the wire. By redirecting just a portion of the savings to a web disclosure initiative you’ll be able to build ongoing sustainable value with your stakeholders.  Do you find yourself thinking – “I’d love to do more with my site but I don’t have the budget?” - reducing your spend on newswires now gives you that budget.

Companies that focus on disclosure and transparency have been proven to maintain value during quarterly earnings.  In a world driven more and more by automated trading IROs need to focus on fundamental investors who view disclosure, transparency and a connection with the company and it’s business a key aspect. By focusing on web disclosure you will create a direct connection with these valuable long-term investors that help you weather the storm as you ride the quarterly roller coaster.

We’re very interested in hearing from you on the above. If you have additional thoughts or completely disagree please comment or send me an email at darrellh@q4websystems.com

Related posts:

1. SEC Guidance enables corporate websites and blogs to be fair disclosure
2. RSS feeds and email alerts increase after SEC guidance
3. A Word on Guidance
4. Disclosure Liability - are you at Risk?