Corporate Law

• Delaware Cases Contain Surprises On Fee Advancement Bylaws

Securities Enforcement & Fraud

• Regulators Seek To Protect Retirees From Securities Fraud

Global Markets

• US, UK, And Australian Regulators Address Short-Selling Concerns

• Culture And Language Impediments To IFRS Universality

Securities Regulation & Disclosure

• Tips From The SEC On Using Corporate Websites For Disclosure

Financial Reporting, Taxation, & Accounting

• Changed Rule On Timing Of Deferred Compensation Now In Full Effect

• As Stocks Decline, Companies Bid Farewell To Goodwill

Download a .pdf of this issue

The SEC untangles the web. Although many companies have used their websites to ensure that information disclosed privately is quickly available to the public, as required by Regulation FD, the release adopting the regulation left it unclear whether website posting can substitute for traditional print releases. Reflecting comments and operating experience since Regulation FD was first issued in 2000, the SEC followed up with Release 34-58288 in August 2008. It touches on a wide range of administrative points, attorneys Steven Bochner and Evan Kastner explain, such as: determining when posted materials become public for purposes of Reg. FD; how disclosure controls apply to materials on the issuer's website; what liability the company has for third-party information to which its website links.

When website information is public. Unless stock exchange rules require otherwise (as the NYSE does), if a company normally uses its website to disseminate information to investors, has notified investors and the press to watch the site, makes linking to the information easy, and keeps the site updated, it may direct investors to the sites by notice rather than by distributing a traditional press release. The information need not, unless other SEC rules require it, be in a specifically printer-friendly format. Release 34-58288 does not provide any safe-harbor assurances, the authors remind, but it does give factors to evaluate, including a time period for posting the information that is adequate considering the type of information, its complexity, and the issuer's general communication practices; the need to alert the public that the information is available, plus where and how to get it; and the time needed to digest the information.

Website liabilities in context. The release reaffirms that information posted on company websites is as much subject to Rule 10b-5 and other antifraud requirements as any other written material, but it clarifies certain points. For example, refreshing or re-accessing a webpage does not constitute republication of that information. If the company wants to declare a particular page "historical" so it can disclaim any duty to update, the page should be tagged and moved to an archive or other segregated web section. The authors point out, however, that if the issuer's jurisdiction imposes a duty to update information, nothing in the SEC release abrogates that duty. Only information posted to the website in substitution for a formal 1934 Act report needs to figure in the company's disclosures and certifications pertaining to its disclosure control processes. The release also contains pointers to avoid liability when linking to third-party sites, including commonly used devices such as exit statements and explanations of the link, then counsels against linking only to favorable commentary on the company. Although the release encourages the use of blogs and other discussion forums, the authors caution against using these forums as a subterfuge to propagate misleading information by company personnel pretending to write in their individual capacities.

Best practices. The authors derive from the release and their own experience a set of best practices for companies wishing to use websites to distribute public information. For example, prominently promote the corporate URL in SEC filings and press releases, along with the items listed in the release, to notify the public and press to use the company's website for current information; and undertake this process at least one fiscal quarter ahead of using the site for Reg. FD purposes. Tout the site to the general and financial press, with a stated start date, and coordinate this with other means of notifying the public, such as RSS feeds and blogs, while making sure that the site itself can handle the increased traffic. With respect to the waiting period to consider posted material to be public, and when applying internal insider-trading prohibitions and disclosure review processes, companies should be as conservative as they are for material disseminated in the conventional printed form. Distance the company from third-party sites for liability purposes, but also review all such sites to ensure they contain no material misstatements or omissions.

Abstracted from Wall Street Lawyer, published by LegalWorks, 150 Clove Road, Little Falls NJ 07424. To subscribe, call (973) 890-0008; or visit www.legalwks.com/publications/newsletters.aspx. To read Release 34-58288, visit www.sec.gov/rules/interp/2008/34-58288.pdf.