The setting: a symposium on disclosure and the internet. The question: what constitutes public disclosure. The answer: there is no clear answer. Depending on a range of factors including, not incidentally, new technology like the internet, the point at which corporate information can be considered public is a murky one.
Posing the tough question was Ted Pincus, chairman of the Financial Relations Board. Representing hundreds of America’s companies – particularly small caps – Pincus repeatedly hammered home his wonderment: is information public if it gets a headline on Bloomberg? If it gets picked up by Dow Jones Newswires, by Reuters, by the local weekly newspaper? Not so long ago, it was a nail-biting adventure being a small cap with news to disclose, counting the minutes until a newsroom editor took pity and a press release ‘cleared the wire’. Nowadays the news wires automatically run full-text press releases with a 15-minute delay. Does that mean full disclosure is assured with a simple press release?
If Pincus was counting on a simple yes or no answer he went home disappointed. The SEC enforcement official on hand, representing government regulators in the debate, refused to oblige. As the veteran IR consultant clamored for clear guidelines, the SEC counsel patiently reiterated the nuances – the painfully gray areas – of what constitutes materiality and public disclosure. Incredibly, IROs in attendance chimed in, We want more rules. And the SEC patiently stood fast: We don’t want to make more rules. We don’t want to weigh you down with a bible of disclosure commandments.
Other questions perplexed and amazed too. One audience member insisted that putting news on his web site should constitute public disclosure because everyone can access it everywhere; another likened this to just handing out a press release to passers-by at headquarters.
When top editors from Reuters and Dow Jones Newswires were asked if their reporters ever listened in on an analyst conference call without the company’s knowledge or permission, they grinned and replied, ‘No comment.’ As everyone knows, the audience for such potentially selective disclosure is far broader than many companies plan.
At one point the SEC enforcement muscle almost, but not quite, cracked a smile: a company – an OTC-listed small cap – has some bad news to disclose, bad news it would naturally like to keep as quiet as possible. What is the bare minimum disclosure the company must achieve before declaring the information public?
There is no such thing as ‘bare minimum disclosure’, the SEC counsel sternly intoned, no doubt wishing he did have that heavy bible full of rules if only so he could wing it at the unfortunate questioner.
