Public Company Information Delivery: Companies, Investors and the SEC Strive to Keep Up

The following blog was posted by Joseph DeGroff, partner at Ice Miller LLP.

For those like me who tend to be somewhat challenged when dealing with rapidly changing technologies, ponder for a moment about how large companies, institutional investors and government are also trying to keep pace. To be sure, the pace of change is increasing as companies, investors and government regulators embrace – or at least accept the reality of – access to information at company Web sites and the growing use of SMS or text messaging, RSS feeds, message boards and blogs.

Just recently, the SEC released interpretive guidance regarding how public companies provide information to the public and the investor community over the Internet. The SEC also has announced that its EDGAR on-line filing system will be replaced with a successor system called IDEA (for Interactive Data Electronic Applications), which will allow investors, analysts and others to more easily extract and analyze financial information from company reports and more quickly compare those financial results with other companies.

These developments follow the 2007 "notice and access" SEC rules that allow companies to provide proxy materials to investors by posting the materials on their Web sites and providing notice that such materials may be obtained on-line.

For securities lawyers, investor relations officials and regulators, these technological advances raise as many potential concerns as benefits. The recent SEC release provides important guidance to companies that want the public coming to their Web sites for information (and not simply send folks to EDGAR or to other third party sites) but without increasing potential exposure under securities laws. Important SEC messages include:

Information posted to a company Web site will likely be deemed to be “publicly available” provided that the company satisfies the Web site awareness, standard practice, basic format and waiting period considerations included in the SEC release.
While the anti-fraud provisions of the securities laws will continue to apply to information posted to the Web site, steps may be taken to manage risk including the separation of dated information into an archive or similar section.
Hyperlinks may be included, but the SEC suggests certain steps to head off assertions that the company has directly or indirectly "adopted" any or all information accessed via the hyperlink.
Summary information about the company and its financial results may also be included with appropriate safeguards such as "alert" language, explanatory language and references to publicly available information that has been filed with the SEC (including risk factors and forward-looking information disclaimers).
For interactive Web site features such as message boards or stockholder forums, the guidance confirms that the company will not be held responsible for third party postings and is not required to respond to or correct any incorrect information or misstatements made by others.

Time will tell whether companies, the investor community and regulators will take full advantage of these technological advancements. Or, will challenges, regulatory actions and lawsuits chase companies back into yesterday's disclosure regime? At the very least, this recent SEC guidance should help companies look to the future and utilize these new information delivery tools while taking appropriate steps to minimize risk. Stay tuned for further development.