In their article “Is Your Company Tweeting Towards Trouble?”, attorneys Julie Jones and Cynthia McMakin, discuss some of the risks and compliance concerns public companies need to consider when using Twitter. In particular they state
“Due to Twitter’s innovative, yet immediate and informal, nature, tweets made by public companies and their employees may create a higher risk of violating US securities laws because the substance of each tweet may not be as thoroughly vetted as information that is disclosed through traditional channels of communication. Twitter’s appeal as a tool for companies to use to quickly dispense information to the public heightens these risks”.
The focus of the paper is how online communication tools, in particular social media, are influencing the communication practices of corporate IR departments at public companies of all sizes. It also examines the question of why corporate IR departments have been slower to adopt social media communications tools than their marketing and corporate communications counterparts.
Dave currently splits his time between teaching public relations in the Department of Journalism and Mass Communication at Abilene Christian University in Texas and works as Director of Investor Relations and Corporate Communications for First Financial Bankshares, Inc. (Nasdaq:FFIN).
While I highly recommend that you take the time to view the presentation in its entirety (below), I have summarized some of the key findings.
On Friday August 14, 2009 the SEC released Compliance and Disclosure Interpretations regarding Regulation Fair Disclosure (Reg.FD). The following post is a direct lift from the SEC website: http://www.sec.gov/divisions/corpfin/guidance/regfd-interp.htm
Regulation FD
Last Update: August 14, 2009
These Compliance and Disclosure Interpretations (”C&DIs”) comprise the Division’s interpretations of Regulation FD. Some of these C&DIs were first published in prior Division publications and have been revised in some cases. The bracketed date following each C&DI is the latest date of publication or revision.
Section 101. Rule 100: General Rule Regarding Selective Disclosure
Question 101.01
Question: Can an issuer ever confirm selectively a forecast it has previously made to the public without triggering the rule’s public reporting requirements?
Last week, at our second webinar of the year, Darrell Heaps, Co-founder and CEO of Q4 discussed the current trends in social media and investor relations. Social media has been given a lot of attention within the IR arena and Darrell has been an active participant in some of those discussions. For example, he recently sat on two panels on the evolution of financial communication and the evolution of disclosure at the NIRI and CIRI conferences respectively this past June. He also presented to the CICA research group in Toronto on trends in corporate reporting earlier this month.
We had another great turnout and a lot of insightful questions at the end. The team at Q4 did tweet the event, but we thought we would provide an overview of the salient points for those of you who missed it:
Darrell Heaps, Co-founder and CEO of Q4 discusses the current trends in social media and investor relations in the following presentation and video versions of our webinar held on Thursday, July 16, 2009.
In a recent edition of IR Alert, Jeffrey D. Morgan, CAE, President and CEO, National Investor Relations Institute cites “the top challenge facing IR now is regulation including moves to have companies become more transparent, governance changes and generally looking at corporate practices. Regulation is one of the key challenges right now. It’s evolving rapidly and where we’ll end up is not quite known.”
What follows is some of his advice to IR professionals for keeping pace in this rapidly changing regulatory environment. He also discusses current challenges and opportunities and ways to address them.
NIRI Webinar - Trends in Technology and Disclosure
NIRI recently held a Webinar entitled “Trends in Technology and Disclosure.” Three IRO’s from Microvision, BGC Partners Inc., and Sun Microsystems each discussed how they have integrated social media tools such as corporate blogs, implemented notice and access releases and enriched investor communication portals to enhance and increase interaction with shareholders.
Microvision – Corporate blogging
The first speaker was Tiffany Bradford, IRO of Microvision who was at the forefront of implementing the company’s corporate blog initiative. As she is the only person in the IR department, she (along with other key members of management) was spending quite a bit of time on the phone with investors. Having worked internally in IR, I can tell you that this can be a time consuming task. As a result, she began looking into cost-effective solutions that would enable communication of non-material information to a broader audience. In order to gain buy-in from management, she armed herself with research of what other companies were doing and what would work the best for the company. The end result was a multi-author blog with representatives from communications and marketing entitled “The Displayground” which links to media articles, product demonstrations, customer testimonials and anything that supports and enhances understanding of the Microvision story.
On Feb 23, 2009 BGC Partners became one of the first widely known companies to utilize a ‘Notice-and-Access’ release for their quarterly earnings. This approach was based on the SEC’s guidance regarding using websites for disclosure under Reg. FD.Leading up to and following the announcement, a lot of online discussion took place about potential pitfalls. The day after the event, Dominic Jones of IR Web Report provided detailed commentary as to how the event unfolded.
As a follow up to this, I contacted Jason McGruder, VP Investor Relations at BGC Partners to find out why his company decided to utilize notice-and-access, how the process went and what the feedback had been from the market. Finally, I also asked what best practices Jason and his team could share so that other companies considering this approach could learn from their experience.
Since the SEC released new guidance permitting public companies to (forgo using newswire services and) disclose material information on corporate web sites and blogs, it has been a wait and see period. Many of the issuers I spoke with across the US (as well as inter-listed Canadian companies) are intrigued at the prospect of reducing newswire costs, but do not want to pioneer the web disclosure model.
So for those of you who take comfort in knowing that others have gone before you, here’s a bit of news on some who are leading the way as well as thoughts on how to improve their approach:
The study is about how greater news dissemination increases the visibility of the firm issuing the news and lowers the cost of acquiring information for investors, AND that this has a direct effect on tightening the bid–ask spread, increasing trading volumes and reducing volatility.
The first thing to understand is that ‘news dissemination’ (as defined in the study) is based on the effect of repeating and transmitting the same piece of information through the business press. For example, when the WSJ writes an article about a firm’s earnings, part of the information distributed by that article is strictly the disseminated news (the other part is new information). The degree to which this is measured in the study is based on the number of articles created by the business press from a company issuing a press release.
Therefore, if a press release is issued and has 100 articles written based on it, it is deemed to have a higher degree of dissemination than one that results in only 10 articles. Following this example, the news with more articles (aka dissemination) results in the issuer experiencing a tighter bid-ask spread, increased trading volumes and reduced volatility. it is important to note that this has no impact on the movement of the stock, these effects occur when the stock moves up and when it moves down.
This is not a study or an endorsement of press newswires and their capital market benefits. In fact, according to the research, if a press release is issued and does not receive any press coverage, it is not considered ‘disseminated’ (regardless of how widely it was distributed through a newswire) and therefore was not included in the study. As such, none of the capital market benefits listed in the report would apply.
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