On-line news organizations are taping conference calls and broadcasting them, sometimes without your permission or knowledge. What do you have to hide? Nothing. But you’ll have a real problem on your hands if the information on the call is misused.
‘The calls are targeted to a sophisticated audience,’ says George Karklins, IRO of CoreStates Financial. ‘Opening them up to a wider audience can result in unfounded rumors, which in turn can cause stock price swings.’ Karklins argues that the information should be responsibly interpreted for the media and smaller individual investors by those who have a better understanding of the industry and the company.
This argument hasn’t stopped the media from getting on and, in some cases, taping the calls and posting them for a wider audience. Bloomberg has been actively rebroadcasting teleconference calls, arguing that limiting access to analysts and institutional shareowners is unfair to individual investors. In the case of CoreStates’ invitation-only call, nobody attending was even aware Bloomberg was on the call much less recording it.
Investor relations professionals faced with this situation have turned to copyright to manage the problem. Leading cyber-lawyers are now advising clients to use introductory language in order to enhance copyright protection (see below, What to say).
Inner circle
‘Some media may want to be on conference calls to find some nugget, as if the company is providing an inner circle with material inside information,’ says Warren Andersen, corporate counsel for General Motors. But conference calls should never be used for such initial disclosure. ‘Responsible companies limit that kind of information to press releases before it’s discussed with analysts.’
No IRO or securities lawyer will argue that the level of detail given to the analysts in teleconferences is the same as that given to the public at large. ‘Most of the public would neither understand nor care about a lot of the information,’ remarks Andersen. ‘While we acknowledge that some members of the media might be as sophisticated as some analysts, experience demonstrates there is a significant danger that some members of the media will misinterpret what management is saying or take words out of context.’ From this point of view, limiting calls to a sophisticated audience actually protects investors rather than disadvantaging them.
As pointed out by Michael Bruynesteyn, director of IR at GM, ‘The calls replace face-to-face meetings with large groups of analysts; meetings that have traditionally been closed to the media.’ Yet GM’s third quarter 1997 earnings teleconference was recorded and posted up on Bloomberg. After finding out by accident, GM worked to remedy the situation. ‘A call reminding them of our rights quickly got the rebroadcast off the system.’ Afterwards, GM adopted a statement for conference calls advising listeners to avoid violating its copyright.
Verbatim violation
But, copyright laws are not an absolute ban on the use of the information in analyst conference calls. Excerpts of the calls can be published by analysts in their reports under the fair use doctrine. But recording verbatim or transcribing the content of the call would be a violation of copyright law.
Many states make it illegal to tape telephone calls without the consent of the parties. Lawyers advise company management to tell the callers that by being on the call, their consent is automatically implied if they continue to participate. This may not offer complete protection, according to one securities counsel, ‘But it’s a useful weapon, putting the company in a strong position to demand that the materials be removed from the site where they have been posted.’ Most press told at the outset of a call that the company is recording it for the purpose of copyright protection will think twice before posting a transcript. Companies may also try to carefully restrict media calls to the media and analyst calls to analysts.
If you’re worried that the copyright notice, along with safe harbor language and anti-wiretapping warnings, will clutter the call with legalese, perhaps the teleconference vendor could read it during the introduction to the call. ‘It doesn’t matter how you do it,’ says a legal expert. ‘Just do it.’
What to say This call is being recorded by XYZ Corporation and is copyrighted material. It cannot be recorded or rebroadcast without XYZ’s express permission. Your participation implies consent to our taping. Please drop off the line if you do not agree to these terms.
Morgan Molthrop is director of IR at Georgeson & Co in New York.
