The 25 most valuable Blogs in the US – 2011

Social Media — 4 Trends To Watch in 2012: http://huff.to/uIiBoS

How Investors Select Financial Advisors: http://bit.ly/vVKi5w

6 Reasons Most Infographics Don’t Cut It: http://rww.to/voBYCR

SEC Releases New Draft on EDGAR Filing Manual: http://ir4.me/tBSwZ

Eye-Tracking Study Finds iPhone, iPad Draw More Attention Than Android Devices: http://t.co/5x8Dak71

Social Media Monitoring: You re Doing It Wrong: http://bit.ly/sXAu7q

TMX board recommends Maple Group takeover bid: http://tgam.ca/DC4R

Groupon’s IPO: What you need to know: http://on.mash.to/vHASB3

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Here’s a list of interesting things we’ve been reading and sharing on Twitter this past week. Lots of great articles, we hope you find it interesting!

Social Media & IR Best Practice example “Dell Investor Relations Answers Questions from Social Media” http://t.co/EIPtZBj

FINRA proposes to exempt social media communications from getting prior approval: http://t.co/9OafC4K

Big Changes On Twitter – Everything You Need To Know: http://t.co/vh0Ifjs

New research on social media & IR, Euro focus “IR 2.0 International Benchmark Study”: http://t.co/taz1zoH

Twitter hedge fund beats the market, other funds: http://t.co/5OSpG1Q

Why Social Engagement Is Critical To Business Success: http://t.co/LUg8hPZ

Yes the wealthy are participating in social media: http://bit.ly/r5nVqX

SEC approves NYSE rule for complimentary investor relations services: http://t.co/PtmWBwL

Mind the Gap: http://t.co/Rvp4vxE

Governance Roadshows Prepare for Proxy Season: http://t.co/VdPKW5G

Does “under promise/over deliver” work in IR: http://t.co/yPM3gdA

Computers Rule Wall Street: http://t.co/MiM6QYW

Companies Begin Disclosing ‘Downgrade Risk’: http://t.co/jI6Dxng

Twitter users are more likely to impact your brand than any other social network http://t.co/RzM9VmU

HP To Apple: You Win. http://t.co/Pz9zCtu

Happy Reading!

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Before I get into the recap, I’d like to thank @bropo, @AVGoldberg, @Box_IR and Z_Kommunikation in advance. Honourable mentions go out to @ir_practice and @pkiss as well.

This week, the discussion centered around two main questions.  The first pondered ideas for increasing board/shareholder engagement.  The second tackled how IROs will need to communicate differently this proxy season, due to new era of governance stipulations.

Q1: ‘Want 2 f/u on my RT by @Matt_Brusch: http://bit.ly/apkoTl & discuss ideas 4 increasing board/shareholder engagement.’

A snippet from the article:

Shareholders expect you not only to know your business — how to control risk, market, compete, profit and grow in an increasingly global marketplace — but, in many cases, to know about and effectively oversee the impact that your businesses may have on the financial system.

At the same time, much of the regulatory framework within which your businesses operate is also changing. As SEC Chairman, I recognize that many of our new rules, and the rules that we will be adopting over the next two years, will profoundly impact both how your boards fulfill their responsibilities, and how you communicate those activities to your shareholders.

@q4websystems: ‘Article states ‘new rules adopted over next 2 yrs., will impact both how your boards fulfill their responsibilities and…’
@q4websystems: ‘…how you communicate those activities to your shareholders.’
@bropo: ‘As with most comms plans, I’d make this multi-phase. If not yet doing, provide BoD w/qtrly updates on s/h sentiment.’
@bropo: ‘Reports/discussion can be both quant (survey-based) & qualitative (capturing daily discussion). Protect anonymity of s/h.’
@bropo: ‘Would also make certain to factor current dialog/concerns into quarterly script so s/h hear their concerns being addressed.’
@q4websystems: ‘@bropo I agree with u about 1/4ly updates to board. Should also incl. training on what can/can’t b said.’
@bropo: ‘Next, would roll-out a face-to-face strategy – start first with investor days, and then take key Bd members on the road.’
@bropo: ‘In conjunction with all of that, make it real so that shareholder questions get directly to the Bd – responses w/control.’
@bropo: ‘Training definitely required before you take them on the road. Practice by including them in onsite activities, like s/h visits.’
@bropo: ‘Visits to the company, that is. When they’re on track, then you can invest in taking them on the road.’
@bropo: ‘But, in taking them on the road, their presence shd be logical, ie rolling out a new strategy in area where they have expertise.’
@AVGoldberg: ‘Most alrdy do1/4ly updates 2 bd & factor S/H sentiment in earnings remarks. Tkng key Bd members on the road wld be something new.’
@bropo: @AVGoldberg ‘You would think … I’m always surprised at how many do not yet report to the Board! Or, info doesn’t get to BoD.’
@AVGoldberg: ‘Not sure how many Bd members would be willing to go on the road to investor community.’
@bropo: @AVGoldberg ‘I think the more BoD members are expected to u/s what’s going on, the more likely they would consider.’
@q4websystems: ‘Esp.on gov.issues RT @bropo: @AVGoldberg think the more BoD members r expected 2 u/s what’s going on, more likely they wld consider.’
@bropo: @q4websystems ‘Exactly on governance issues! If you risk action because of inaction, you’ll reconsider involvement & engagement.’
@q4websystems: ‘Posting gov. policies in pdf on website is not enough anymore….’
@q4websystems: ‘Article rightly states that clear conversations abt how co. is governed & why & how decisions r made.’
@bropo: @AVGoldberg ‘Being a BoD member is a greater responsibility with more accountability than ever.’
@AVGoldberg: ‘Agree BOD has more responsibility than evr, but they think it’s R job 2 keep them informed. If did go out, training wld b key.’
@bropo: ‘And I think they should be engaged at annual meetings. Present reports for their area, i.e., bd recruitment, compensation, etc.’
@q4websystems:@bropo ‘Agree boards shld have more visibility when possible i.e. @ Annual mtg. need 2 convey board is right choice 4 the co.’
@bropo: ‘That said, as with all things, should begin with a strategy, a plan and be implemented with care, control and checks.’

@q4websystems: @AVGoldberg ‘I agree most do 1/4ly. How can IROs ensure board reads report?’

@bropo: ‘Send directly?’:)
@q4websystems: @bropo ‘In addition 2 sending directly what about presenting info. 2 them in person on via webcast/conf. call?’
@AVGoldberg: RT @bropo: ‘IRO 2 speak at BD mtg?’
@bropo: @q4websystems ‘However you can reach them. Many are still not super savvy digitally. Some cos. allow IRO to speak privately to BoD.’
@bropo: @q4websystems ‘Conference calls seem work for them! Reports are often better, dep. on age/composition. Address as works: > one way.’

@bropo: The question is, with all of this accountability and responsibility, are BoD members going to want better comp?

@q4websystems: @bropo ‘Another consideration is BoD’s typically sit on > than one board – How 2 keep them engaged?’
@bropo: ‘Their responsibility. We help.’

@q4websystems: ‘Speaking of governance…another gr8 article 2day that discusses merits of talking 2 investors face-2-face: http://bit.ly/bsS6FY

Q2: ‘IROs need 2 comm. diff. this proxy season. How 2 go about ensuring new issues i.e. say-on-pay are understood by investors?’

A snippet from the article:

As companies approach the 2011 proxy season, they are rethinking the way they reach out to investors and how that communication can be more useful to both parties?

Next proxy season will stand apart in terms of investor communications due to new items on the ballot as a result of demands from the SEC and Congress, including say on pay. And even though proxy access has been delayed, experts say good investor relations should be exercised now to lay the groundwork for when and if access is granted.

@bropo: ‘I think IROs first need to internalize that this is a different kind of voter than they’ve had to address in the past.’
@q4websystems: ‘Proxy issues r another key area board shld b informed & able 2 speak to.’
@bropo: ‘This is a less sophisticated voter, so no more financial/legal gobbeldygook. Play it straight. Address issues upfront/head-on.’
@bropo: ‘It’s a great time to establish a Facebook page that you can point to and provide easy access to voters who own thru big funds.’
@q4websystems: @bropo ‘I like idea of FB page. shld also co-ordinate info. on website 4 those investors who aren’t using soc. med.’
@q4websystems: ‘I think it’s imp. to keep investors informed of key gov. issues thruout yr, which IMO may make proxy season a bit easier.’
@bropo: ‘And not just “retail investors” that so many seem to disdain. Of course, always point back to posted/filed info.’
@q4websystems: ‘Article talks about how Time Warner meets with 50 lrgst investors during proxy season, & fewer during yr. sometimes with IRO.’

@q4websystems: ‘Should IRO or corp. secretary be in charge of informing investors esp. during proxy season? In my exp., IR dept. did this.’

@bropo: ‘In my experience, IRO does this better. Of course, report & update Corp Sec on a regular basis.’
@q4websystems: ‘Agree need 2 work 2gether’
@q4websystems: ‘As I stated b4, gov. issues shld be discussed thruout yr. easily done @investor anal. day or on 1/4ly conf. call.’
@AVGoldberg: ‘Advantages to both IRO & Corp. Sec. Think answer depends on co. and s/h base.’

@q4websystems: ‘What about activist investors? hard 2 control if they call Board directly.’

@bropo: ‘Shd they b a surprsie?’
@q4websystems: ‘Hopefully not’ RT @bropo: Shd they b a surprsie? RT
@bropo: ‘IRO shd be aware/prepared/reporting. Agreed upon responses.’RT @q4websystems: Q2: what about activist investors?

@bropo: ‘Can’t always prevent/control, team shd be prepared.’ RT @q4websystems Q2: activist investors? hard 2 control if they call BoD directly

Well that is the end of another great #irchat.

Don’t forget to join us every Thursday @ 11:00 a.m. EST. In the meantime, if you have any questions you’d like to submit for an upcoming #irchat, tweet @meetthestreet or send an email to sherylj@q4websystems.com and I’ll pass it along.

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Google intends to make future announcements regarding its financial performance exclusively through its investor relations website.

Google is able to do this based on the SEC guidance from Aug 2008 regarding the use of websites for disclosure. This guidance states that under certain circumstances, companies can rely on their websites and blogs to meet public disclosure requirements under Reg FD.

As we all remember all too well, shortly after this regulatory change the market collapsed and this new channel quickly faded into the background, while most companies fought to survive the worst recession many of us have ever seen.

However, with 2009 behind us and the recovery underway, the first quarter of 2010 has seen the most activity on the web disclosure front yet, with a number of companies testing out new tactics. Let’s take a look at some examples.

BGC Partners (Nasdaq: BGCP)

BGC Partners, Inc. (BGCP 6.51, 0.00, 0.00%) , a leading global intermediary to the wholesale financial markets, today announced that it plans to issue an advisory release after the close of market on Wednesday, May 5, 2010, notifying the public that a complete and full-text financial results press release has become accessible at the “Investor Relations” section of http://www.bgcpartners.com.

Expedia (Nasdaq:EXPE)

Expedia, Inc. (Nasdaq: EXPE) today announced fourth quarter and full year 2009 results through a press release that is available now at http://www.expediainc.com/ir.

From Q4 Earnings Call – Seeking Alpha Transcript “You may also have noticed we have changed the way we are distributing our earnings release. Rather than put the release out over the newswire, we are pointing people to our IR site where they can pull down the PDF version. You should expect us to continue this practice going forward.”

Google (Nasdaq:GOOG)

MOUNTAIN VIEW, CA–(Marketwire – April 15, 2010) -   Google Inc. (NASDAQ: GOOG) has released its first quarter 2010 financial results. Please visit Google’s investor relations website at http://investor.google.com to view the earnings release. Google intends to make future announcements regarding its financial performance exclusively through its investor relations website.

Marathon Oil (NYSE: MRO)

HOUSTON, April 6, 2010 – Marathon Oil Corporation (NYSE: MRO) announced that the Company will begin issuing advisory news releases notifying investors and other interested parties when new and material information is available on its website, in compliance with the U.S. Securities and Exchange Commission’s guidance regarding “notice-and-access” news releases. With this change the issuance of full-text financial news releases via a wire service will be discontinued.

Reis (Nasdaq: REIS)

Reis, Inc. (Nasdaq:REIS), a leading provider of commercial real estate market information and analytical tools, announced that it plans to issue an advisory release before the opening of The Nasdaq Stock Market on Monday, March 15, 2010, notifying the public that a complete and full-text financial results press release has become accessible at the Investor Relations portion of Reis’s website (http://www.reis.com).

Tellabs (Nasdaq: TLAB)

NAPERVILLE, Ill., Jan. 26 /PRNewswire-FirstCall/ — Tellabs is announcing its fourth-quarter and year-end 2009 results and new quarterly dividend. A complete version of the news release is available at http://www.tellabs.com/news/2010/4q09.pdf.

We are certainly still in the early stages of web disclosure, however it is interesting to note that only Google has announced the intention to use its website exclusively and to no longer use advisory releases (aka “notice and access” press releases) . For the rest, each has moved to a shorter release with a link to their IR website for the details.

As expected we have heard from both sides of this debate, pro web disclosure and pro wire disclosure. Here are two of the popular posts:

Google moves to web disclosure for Reg. FD
http://www.irwebreport.com/daily/2010/04/16/google-moves-to-web-disclosure-for-reg-fd/

Is Google’s Latest Move Evil?
http://www.fool.com/investing/high-growth/2010/04/19/is-googles-latest-move-evil.aspx

In addition to the above posts I’ve been a part of two great discussions on the topic on LinkedIn. Both in the NIRI group (you have to be a member of NIRI to view) and also in the IR 2.0 group.  Each provides a good balance of opinion on the pros and cons of web disclosure.

In general, I think that only large companies with a significant following are a good fit for web disclosure. Companies like Google and other well known brands, have the ability to use their websites as a recognized channel of disclosure and can instruct the market to use their site and all available alert options (email, RSS, social) to keep abreast of news.

For most companies, either continuing to use a full-text press release alongside with posting it on their website or using an advisory/notice and access release are the two remaining options.

I am not against using press releases. In fact here at Q4, we use press releases when announcing big news.  I can easily say it is not a silver bullet, but used in conjunction with web and social channels, press releases can help increase awareness about your company.

Having said that, I think that the hybrid approach of continuing to use the wire to publish advisory releases that link to the IR website for detail(s) is where the market is headed.  The examples previously mentioned are an early indication that this approach may be the one most widely adopted going forward.

Using advisory releases gives companies the additional reach that a newswire can offer, while keeping costs down, and directing investors to the website for the details.  Linking to the website provides many search engine benefits for the company and gives them an opportunity to build direct relationships through subscription options like email, RSS and social channels.

It’s important to note, if you are going to direct investors to your site, you need to make sure it is ready for them.  IR website best practices, enterprise level hosting and accessibility + mobile access are all important areas to focus on to ensure that you can leverage the increased traffic to your site.

The benefits of using your IR website in this matter include:

• Improved disclosure & transparency – linking to your website allows you to share Excel files and formatted documents, which give investors more context and downloadable assets than reading the news on a third-party website.
• Improved efficiency –  putting the full-text release on the website allows you to manage only one version of the release and related financial tables , no longer will you have to juggle multiple versions with the newswire
• Increased investor traffic – linking to your website as a recognized disclosure channel will increase the number of investors to your website and allow you to provide more context  around your business
• Increased direct subscriptions and followers - with more investors visiting the website, there is an increased opportunity for them to register for email alerts, RSS and social updates –allowing you to build relationships directly.
• Reduced costs over time – moving to advisory releases reduces costs simply because these releases are shorter and commercial wires charge by the word.

We’re going to keep track of this trend and will report back in Q2.  If you know of other companies using these tactics, please include in the comments or share with us on Twitter or LinkedIn.

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The 2 ½ day event consisted of discussion sessions and workshops to educate and generate ideas on solving issues in XBRL development such as rendering, versioning, data quality and validation.

In an otherwise very tech-centric conference, Q4’s Co-founder and CEO, Darrell Heaps provided some interesting ways that companies can make XBRL content discoverable, shareable and viral to move seamlessly through the financial web by key stakeholders such as analysts and investors.

What follows are the salient points from his presentation ”IR Websites and XBRL Rendering” from the session: Best Practices and Current Approaches for Rendering XBRL in which panelists discussed current approaches and emerging practices for preparing and rendering XBRL content.

Other Speakers included:
Diane Mueller, VP, XBRL Development, JustSystems
Masatomo Goto, Manager, Fujitsu
Ted Stavropoulos, Director of Business Development, Rivet Software

Before I get into the details, here is a link to a recent blog which provides a broad overview of why XBRL is relevant to IROs and the requirements for adoption, a broad definition and the implications of using it to help improve processes.

IR WEBSITES AND THE SOCIAL FINANCIAL WEB

Some emerging trends in the market over time provide compelling evidence to support providing users with the tools to make XBRL filings easier to find, download and analyze.

KEY TRENDS

1. The IR website is a primary channel of communicating and is how companies are interacting with the market.  For example, a study by Rivel Research states that 75% of pro investors use corporate websites weekly if not daily.
2. Increased use of the web and social media to communicate with key audiences.  For example, a Nielsen online report issued in March 2009, states that 67% of the global online population uses social networks and blogs.
3. Decline in the number of sell side analysts are helping to push coverage and equity research to the social web.  As such there has been an emergence in financial blogs such as Seeking Alpha, StockTwits and wikinvest.  Companies should pay attention to these sites and review how they are packaging their information to make it easier for them to be covered by these new channels.

One interesting thing to note about Wikinvest is that while it is not yet based on XBRL, they are leveraging interactive data features.  For example, they have charts and other data presentations each as its’ own atomized piece of content.  Packaging information so it is easier to share, disseminate and embed enables downstream content providers such as blogs to pick up the information and include it in their reports.

INVESTOR RELATIONS ADOPTION

Some observations and recent comments about the filing of XBRL statements for reporting periods ending after June 15th indicate that companies are only doing the minimum to be compliant under the SEC mandate.

For example, In a recent IR Magazine blog, Neil Hannon, senior XBRL consultant at Cambridge, Massachusetts-based Gilbane Group was quoted as saying “Companies are doing the bare minimum with XBRL on their websites. ‘They’re complying with the SEC rules by putting their XBRL statements on the web but they aren’t giving users any tools to play around with them.”

It goes on to quote an IRO who feels that “putting more sophisticated XBRL tools…could benefit retail investors but he has no plans to do so because the company is over 90% institutionally held.”

Adding to the sentiment of Neil Hannon, the current solutions being offered to companies right now don’t have the XBRL content connected to the IR website and instead are treating it as a pop-up.  Not having the content anchored in the IR website decreases the “discoverability” of your company by diminishing the ability of search engines to index the content and help you be found by new investors.

It has obviously taken a lot of work to get XBRL to this point.  One can view the unfolding of XBRL in three phases:

1. Creation of taxonomy
2. Compliance
3. Competition

However, it seems that there has not been a lot of thought to how it will evolve and the benefits of catering to key audiences such as investors, analysts and the financial media by making the content viral and shareable across the financial web.

We are in the compliance phase as the deadline for the 500 largest companies to produce their first official XBRL statements was August 10th (which is the deadline for 10-Qs from calendar-year filers, or within their one-time-only 30-day grace period).

In order to move from a straight “compliance” mentality, IROs need to see how the data can be used in innovative ways to help tell their investment story and differentiate themselves from their peers.   At a very high level, the XBRL community needs to demonstrate to the IR community that using XBRL as a strategic tool will help them be more competitive.

Right now, the focus will likely be on reviewing XBRL statements filed to-date.  As issuers get more savvy and nail down the straight compliance aspects, they will hopefully begin to assess how they can make the data easier to render for their key audiences.

OUR VIEW OF WHAT’S NEEDED

In speaking with the investment community and in particular our conversations with companies about the many benefits of social media and how it can enhance communications with their investors and the investment community at large, we offer the following strategic concepts for rendering XBRL content for the social web:

1. Rendered XBRL filings should be connected to the “source of authority” (SEC database): In order for XBRL data to be easily shared and disseminated throughout the social web it needs to remain connected to the “source of authority” in this case, being the SEC database.  In doing so, this will help ensure the data is validated and trusted as it is shared, embedded and republished across the web.  In addition to this, our view is the filing should also have a permanent url connected to IR website. Again, so that it can be linked to from various external sources. Many of the early solutions provide the XBRL as a static “copy” of the SEC filing and display this in a pop-up alongside other filings. This approach disconnects the filings from the source of authority and inhibits the ability of this content to maintain it’s integrity while being shared and republished.
2. Content should be discoverable:  XBRL content should be integrated into the IR website, not simply linked to a pop-up alongside all of the other filings.  Doing so improves the content’s discoverability via search engines and exposes the financial data to the web at large. Giving investors the ability to use search engines to search for “XYZ corp’s income statement” will expose the value of XBRL to the web and provide the ability for companies to attract new investors.
3. Charts, Graphs, Visualization:  The use of charts, graphs and other visual elements is key to helping the company “tell it’s story through data”.  These elements enhance the investor’s experience by allowing key financial information to be quickly extracted and understood.  By providing visual elements to the rendering of XBRL it will help both investors and IROs experience the strategic value of interactive data.

Of course the above three elements are only the beginning. XBRL represents a massive opportunity and challenge for the market.  The key aspect as this point of XBRL’s evolution is for the market to start focusing on the true value it can provide to investors and on how companies and their IRO’s can use XBRL to provide greater insight into their value and telling their investment story.

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Chairman Cox Video: The SEC has approved interactive data financial reporting to give investors faster, better, and less expensive information disclosure.

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Most of the companies I’ve spoken with are intrigued by the potential cost savings of disseminating their disclosure without the expense of newswires. Some of the companies I’ve spoken with are busy putting plans in place to meet the new SEC criteria. Others have been made to fear that adopting this method of disseminating information to the market would prevent them from attaining simultaneous disclosure.

Most are wondering what steps they need to take to transition to this model. Although I have dealt with this more specifically in previous blog posts, here is my 1,000 foot perspective:

1.       Inform yourself of what’s possible from a technical standpoint and obtain opinions from a number of sources. To optimize web disclosure according to the SEC’s new guidance, your goal should be to investigate technologies that enable you to easily meet the SEC criteria while minimizing risk for your company. You may have to pay more than you do now for this technology, but taking control of your own distribution will allow you to reallocate some of your newswire costs to ensure a more effective web presence.

2.       Seek strategic communications consulting from experts well versed in IR best practices. Your corporate and investor web site is your most powerful stakeholder communications tool, if properly utilized and promoted. Choosing the right web platform and distribution technologies is only one half of the equation – having a strategic approach to your web communications is the other half. Over the years this has become a science in terms of required/expected content, how to structure the site, how to present your information for maximum impact and usability etc.

3.       Seek independent legal counsel in order to plan your company’s response/transition. 

It is to this end that I bring you an excellent article – a legal opinion penned by Colin J. Diamond, a partner in the securities group at the New York office of White & Case LLP – on ‘How to Implement the SEC’s New Guidance regarding the Use of Company Web Sites’. This recent article appeared in the November/December 2008 edition of The Corporate Governance Advisor.

The article is very easy to understand and comprehensive in its approach.  Colin examines each aspect of the SEC guidance and deals with it in detail.  I have provided an excerpt from the article below – a great chart that examines key factors of the SEC guidance along with how to respond to each. I highly recommend that you read the entire article and use it (or something like it) as a foundation on which to examine how to approach the guidance from a technical and communications standpoint.

[1] Note that an earnings release will in any event need to be filed with the SEC pursuant to Item 2.02 of Form 8-K.

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To view a complete list of all the comments submitted go here: http://www.sec.gov/comments/s7-23-08/s72308.shtml

———————————————————-

November 5, 2008

Florence E. Harmon
Acting Secretary
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-1090

Re: Commission Guidance on the Use of Company Web Sites (the guidance)
File No. S7-23-08

Dear Ms. Harmon,

This letter is in response to the request for comments on the Commission Guidance regarding the Use of Company Web Sites under Regulation Fair Disclosure (Reg. FD). To give you some background on my company, Q4 Web Systems is a software firm founded in 2005 that provides on-demand solutions to help public companies in the management and distribution of corporate material information.  We are committed to using emerging Internet technologies to help public companies reduce costs, manage risks and build better relationships with their investors and stakeholders.  

Introduction

We fully support the SEC’s guidance regarding the use of company web sites for the disclosure of material information.  Since the original Reg. FD ruling, we have seen a dramatic transformation in how individuals and the market communicate with one another. As the penetration of the Internet surpasses 70% in North America, and with the emergence of new web services and capabilities, we now live in a world where the distribution of information is immediate, free and democratized. In the past, only media companies, newswires and their partners had the ability to move information through the market.  Today a combination of web sites, RSS, email, search engines, social networks and emerging communication platforms like Twitter now moves information throughout the world at a rapid pace and at no cost for distribution.  With the pace of innovation on the Internet increasing, this trend of immediate connectivity will only continue. The recent guidance is an important step in recognizing and supporting this key trend.

Our comments related to this recent guidance are outlined below.

Comments

1. The Internet has replaced proprietary networks for the distribution of information

The recent guidance has laid the ground work for allowing companies to use web technologies to disclose information under Reg. FD.  We fully support this decision because the Internet has now replaced proprietary networks for distribution and the recent guidance clearly demonstrates support of this evolution.

This change to Reg. FD is based on the fact that technology has advanced beyond the need for newswire distribution. Newswires were founded on infrastructure; they were a required intermediary for companies in the pre-Internet era because they provided a necessary service. By using a newswire, companies could have their press releases delivered directly to the journalists of publications. This was initially accomplished through telegraph (hence the wire in newswire), which then evolved to private networks and satellites. However, today this entire infrastructure has been replaced by the Internet.  Newswires no longer own their infrastructure and in fact rely on the Internet to provide the backbone of their distribution.  Newswires (just like you and I) pay nothing for the privilege of using the Internet (beyond connection fees) to distribute information. For the same reason that newswires now rely on the Internet for distribution, we believe that companies should also have the right to use the same technologies and methods to connect with their stakeholders and the market in general. The new guidance ensures that companies have this option, should they wish to pursue it.

In speaking with numerous issuers across the U.S. since the release of the SEC’s recent Reg. FD guidance, it is clear that they are interested in alternate distribution channels for their disclosure – not only to save costs, but to build better relationships with their stakeholders.

According to our clients and those individuals we have informally surveyed, annual press release distribution costs range from $60,000 to $300,000 per year.  By adopting a web disclosure model, companies stand to save a considerable amount of money while improving their level of engagement with the market. The Internet enables the distribution of information for free – meaning a more level playing field for issuers who may not have large communication budgets. 

We believe that all companies should have the right to communicate directly to their stakeholders and the market at large using web technologies like web sites, RSS, email alerts and social networking services such as Twitter.  By following the guidance and transitioning to a web disclosure model, we believe that significant improvements can be made to the disclosure system while dramatically reducing costs for issuers.

2. Social Media has redefined how the world communicates and is doing the same to corporate disclosure

The explosion of social media has redefined communications. Blogs, RSS, Twitter, Facebook, LinkedIn and other social networking sites now provide an interactive two-way method to distribute, discuss and comment on information in real-time. In the past, companies would communicate in a “broadcast” method, pushing information out – similar to how an issuer pushes information out to the market now via a press release. Social media differs in that it permits a ‘conversation’ with a broader group of interested parties. It goes beyond even a two-way dialogue and allows an entire community of individuals, corporations, and media to participate in a conversation with an issuer, which in turn informs issuers as to the information most relevant to its audiences. These conversations define transparency between the issuer and its audiences. Any interested party can plug in to this conversation simply by subscribing to a company’s RSS feed, email alerts, or by following them on Twitter or any number of similar social networks.

Social Media’s impact can be seen explicitly in how the media is now notified of breaking stories. In the past, journalists relied heavily on press releases to write their stories, however, in today’s world, services such as Twitter, which are able to instantly notify large groups of people, are now key to breaking news stories. In fact, CNN anchors now track twitter conversations live on-air during broadcasts and many leading companies currently use Twitter to release breaking information as an important element in how they communicate to the market.

Social media services have created the infrastructure that allows for relevant content to be easily found, subscribed to and followed. With the recent SEC guidance supporting social media and with it being an integral component of how companies will disclose information, we believe the SEC has taken a significant step forward in ensuring that regulation can and will support emerging communication options for companies and investors.

3. Interactive data (XBRL) and Web Disclosure are intrinsically tied to market transparency and efficiency

The broad adoption of XBRL will provide a significant improvement to the transparency and utility of financial information.  With the new guidance supporting web disclosure, companies will now have the option to notify the market of the release of this information and have it posted on their web sites and distributed to interested parties through their RSS feeds, Email Alerts and Social Networks.

This approach to releasing material information will support the ongoing conversation between investors, companies and the market in general because the information will be easily shared, distributed and then discussed in the market using web technologies.

Once information begins to be disclosed in this fashion, aggregators will establish new methods to obtain the content from issuers and redistribute it to their content partners such as Yahoo!Finance or Bloomberg. These aggregators are not bound to exclusive contracts with newswires and will quickly follow the market to obtain the necessary information in order to remain relevant.

We applaud the leadership position of the SEC regarding XBRL and web disclosure and believe that the combination of these initiatives will usher in a large number of new and innovative services that will benefit investors, issuers and the market in general.

4. The principles based guidance has been written to drive innovation & transparency. We support not adopting “bright line” tests which would result in built-in demand for specific technologies.

The use of the Internet continues to increase, and the speed and options for communication continue to expand.  The SEC, with its current guidance, has opened the playing field and broadened the channels by which issuers can communicate under Reg. FD. The Commission needs to continue to provide guidance that drives innovation and challenges the market to create new ways to improve transparency and interactions between a company, their stakeholders and the market at large.

Already, since the SEC’s recent announcement, we have seen great activity in the market as issuers look to educate themselves and consultants and technology providers look to fill the gap.

The current guidance, as it exists, encourages a transition to a web disclosure model – which we believe is a very effective and responsible way of moving the market forward. While issuers are taking steps to notify the market of their disclosure channels, they will also be looking to improve their own disclosure processes, technologies and delivery systems.

Many of the early concerns expressed by newswires (regarding universal and simultaneous disclosure) will be quickly addressed as the market moves toward a web disclosure model. Doing anything to impede the direction that the SEC has taken, would be to deny the enormous potential the Internet has for leveling the playing field and improving communications between an issuer and its stakeholders.

By adopting a principles-based approach rather than bright line tests, the Commission is allowing the market to determine what is acceptable and ensures that certain technologies and/or companies are not able to create protected industries. This is in the best interest for investors, companies and the market at large.

5. The market is already using the Web to consume disclosure and those that are not will quickly adapt.

The fact of today’s market is that the Internet and web technologies are being used by virtually all stakeholders (including newswires) in the distribution and consumption of corporate disclosure. Newswire’s make many claims about the value of their systems and how the media, investors, markets, etc. will not be able to function without them.  Although we agree that newswires move a great deal of information in today’s world, their current model of distribution is quickly growing irrelevant as Web technologies and social networks surpass the value they provide.

Although newswires are currently responsible for the initial distribution of press releases from a company to an aggregator such as Yahoo! Finance, it is then the Web and all of its interconnectivity that spreads that news around the world.  Whether by RSS, Email alerts, Twitter, etc. news spreads around the world in a split second using the Web as the platform – not the newswire. The newswires are well aware of this and in fact, use the same technologies such as RSS, Email, Twitter and social networking to distribute their press releases around the world.

The key aspect of the guidance that we support is the right for each company to use the same technologies to interface directly with the end user. The need for companies to have an intermediary transmit information from them to the market has been replaced by the Internet and all related web technologies.

Financial websites such as Yahoo and Google and many others have already begun to post blogs alongside press releases.  As companies leverage the web to disclose information, it will also enable a more direct relationship between the companies and the aggregators. The same reasons why companies should have the right to communicate directly with end users also apply to communications between companies and aggregators. With today’s technology there is no longer a need for an intermediary between a company’s information and that of its stakeholders – no matter if these end points are people, web sites or other systems.

On that note, some institutional investors currently consume full-text press releases in their trading and/or investment systems. As such, there is an argument that these stakeholders will be at a competitive disadvantage to the retail investor if information is disclosed through the web and not in a full-text press release delivered by a newswire.  This argument is weak considering the competitive nature of automated trading – as companies begin to disclose information through the web, these systems will quickly adapt to consume the information, whatever and wherever its source may be. 

In fact, there are numerous technologies already emerging in the market today that provide institutional investors with a rich set of structured information to drive their investment and trading strategies. Next generation Bloomberg’s such as FirstRain, Kapow, InfoGen and SkyGrid instantly search and acquire web content from issuers and stakeholders, then apply advanced filtering, ranking and analysis and present it through various methods to their subscribers. As issuers begin to disclose through the web, these platforms and the current dominant players will be quick to adapt.

6. In order for this guidance to be adopted the stock exchanges need to be brought on board.

Due to the major exchanges having their own set of disclosure policies, it is important that the commission work to bring them on board with this new guidance. Exchanges should not be allowed to force companies to use any specific newswire or any newswire at all.  The SEC needs to make this a priority as it is contradictory to the guidance and a source of confusion amongst stakeholders at all levels.

Conclusion

The growth of the Internet and web technologies has fundamentally changed how companies communicate with their stakeholders and the market at large. The principles-based guidance endorses a transitional process of moving from the established systems to one that fully leverages all available web technologies. 

We ask that the commission remain focused on the benefits that web disclosure provides for companies, their investors and stakeholders and that it continue to utilize principles-based guidance that is focused on driving innovation and market improvements.

On behalf of the team at Q4 we appreciate the opportunity to comment on the guidance and would be pleased to discuss any of our comments at your convenience.  Please feel free to contact me at any time.

Sincerely,

Darrell Heaps
CEO
Q4 Web Systems Inc.
416-626-7829 ext. 222
darrellh@q4websystems.com
www.q4websystems.com
www.q4blog.com
www.twitter.com/darrellheaps   

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Following the U.S. election, changes will be focused on the financial sector (no surprise) and also include large corporations who rely on the wholesale or public debt market to finance their operations. 
 

The degree to which an entity relies on the debt markets to finance operations (eg. General Electric or the large automotive companies) is a key consideration in determining the disclosure required of these organizations. If the company’s counter parties are pillars of financial institutions and if the reliance is significant enough that the company would not be able to fund itself, if for some reason it was unable to roll over its debt, the impact would be considered systemic in terms of the ripple effect on the economy. Companies fitting this profile will be impacted by new disclosure legislation.

We can anticipate fairly draconian requirements in the coming months – a whole new wave of requisite disclosure that we’ve never seen before. It will certainly mean additional filings as well as new/more information needing dissemination to the market.

Included in this, we can anticipate the need for much greater detail surrounding the content, risk and backing of investment products.

And companies will need to be much more upfront about their own risk exposure and appetite along with details on how they’re managing this risk.

What policy makers have learned from the past is the need to get enough of the right information into the market to gain a perspective on trends and that means an insistence on information being disclosed in a compatible manner.

The goal of the enhanced disclosure is to not only protect investors and the economy at large, but also to promote a more responsible approach to managing companies, which was clearly lacking in the financial sector over the past several years.

The challenge of course for most companies is balancing the escalating demands for timely disclosure against the risks of disclosing inaccurate or incomplete information. Along with the increased disclosure requirements will come the need for retooling existing disclosure controls & procedures and determining whether manual processes, technical solutions or perhaps a combination of both will best help to protect organizations from increased compliance risk.

No matter if McCain or Obama wins today, change is a foot!

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IDEA is the latest in a string of significant announcements that have come out of the SEC including, XBRL mandate and the guidance on web disclosure and RegFD. There have already been a number of posts regarding this announcement and it seems to be well covered by the financial media (see bottom of IR Web Report’s post – SEC unveils IDEA — and that’s all it is). 

During the webcast Chris Vickerson, our CTO was involved in FT Alphaville’s liveblog  discussion and also had one of his question answered by Christopher Cox.  After the web cast the SEC home page was updated with a significant focus on IDEA. From the link on the home page there is an overview of IDEA that I’ve summarized below (emphasis is mine):

IDEA will at first supplement and then eventually replace the EDGAR system, which will become an archive of SEC filings made prior to the new era of financial reporting in interactive data format. The SEC has formally proposed requiring U.S. companies to provide financial information using interactive data beginning as early as next year, and separately has proposed requiring mutual funds to submit their public filings using interactive data.

The decision to replace EDGAR marks the SEC’s transition from collecting government-prescribed forms and documents to making the information itself freely available to investors in a user-friendly format they can readily use. Instead of sifting through one form at a time in EDGAR and then re-keyboarding the information to analyze it, investors will be able to utilize interactive data to instantly search and collate information to generate reports and analysis from thousands of companies and forms through IDEA.

The ease with which interactive data will make financial information more readily available also is expected to generate many new Web-based services and products for investors. IDEA’s launch represents a fundamental change in the way the SEC collects and publishes company and fund information — and in the way that investors and the markets will be able to use it.

Although there was nothing materially new announced during today’s webcast (no new technology or application were shown), IDEA is an important when viewed in the context of how disclosure is going to evolve over the next 5 years. The timetable to full maturity is 5 years out, and while it is being phased in EDGAR will remain an important component of the financial disclosure system. However, if we fast forward to market adoption of XBRL and IDEA there will be many new ways that companies will create and distribute disclosure to the market and there will be all sorts of new applications and methods for investors to benefit from this data. It certainly is an exciting time for our industry and we are very pleased to see the leadership Christopher Cox has shown in bringing the SEC into the age of the Internet.

Some Additional information on Interactive Data:
http://www.sec.gov//spotlight/xbrl.shtml

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