Rules, rules, rules, all these damn rules. IROs sometimes feel like dancing circus bears resigned to a life of dutiful pirouettes under the cracking whips of securities regulators, legal counsel, Wall Street analysts, fund managers… (Good little bear. Stay inside the box. Jump through the hoop. Night after night, quarter after quarter.) Potentially conflicting disclosure demands of the NYSE, NASD and other stock markets only make matters worse. And if that wasn’t enough, public companies now have to consider how all those rules apply to the mercurial world of online disclosure.
For all its great benefits, the internet is helping many good companies get themselves into hot water. IROs feel compelled to meet the public’s clamor for timely, meaningful information, though sometimes the clamor takes on paparazzi-style volume. The internet can help them lower the din, even if their electronic documents do lack a footnote here or a safe harbor statement there.
‘I should be so lucky,’ other IROs grumble. ‘Mine is among the thousands of major stock exchange-listed companies that no-one seems to know about. There’s no clamor whatsoever. No analyst coverage. No headlines. No sexy story to tell. Six months after the IPO, investors are shuffling out the door.’ These companies make a raw, desperate thrust at notoriety by building slick web sites. They throw everything they have into cyberspace. Level the playing field, folks, knowledge is power! Suddenly regulators spring like a jack-in-the-box. Their ruling: This disclosure constitutes an ‘offer’. Guilty as charged.
While securities regulators have strict, time-honored rules for formal disclosures, most of the information on IR sites is governed by comparatively ambiguous anti-fraud provisions and broad regulatory requirements. Press releases, conference calls and management presentations, for instance, all swim in a pool of murky, gray regulation.
Lifeguards are on duty, however. Securities regulators around the world recently admitted to having conducted an international surf day to scan the internet in search of regulation-breaching web sites. The result: they did find many fraudulent sites. The bad news: many of the accused were unaware they had broken any rules.
In broad terms, electronic documents are subject to the same securities regulations as printed documents – just because they travel through phone jacks instead of mail slots, they aren’t exempt. They deserve equal scrutiny, and they beckon the old adage, Better safe than sorry.
Beyond common sense, there are precious few guidelines for online disclosure. Some guidelines are being written, though slowly – much more slowly than the speed of innovation. Just as all IROs can respond to the clamor for timely information and use the internet to disseminate it, they can also get into trouble if they don’t pay attention to all the rules, rules, rules.
