Securities lawyers urge disclosure via newswire

Oct 17, 2008

Perils in relying on company website as primary channel

A poll of securities lawyers conducted by an IR firm shows strong preference for using newswire services over corporate websites for disclosure of material information.

In its August guidance, the SEC said public companies could use their corporate websites as channels for market-moving information in place of wire services or even EDGAR filings if they made efforts to prepare investors for the shift. But securities lawyers have greeted the news warily.

The Equity Group, a New York-based consultancy, says ‘an overwhelming majority’ of 15 lawyers in its survey advise public companies to continue using the newswires as the primary venue. In a release publicizing the results, Robert Goldstein, president of the IR firm, says securities lawyers raised a number of concerns about whether company IR sites could be properly considered ‘recognized channels’ of distribution, as the SEC requires.

Lawyers also point to the problem of potential fraudulent web postings, technical glitches disrupting access to news and concern about the SEC guidance not squaring exactly with NYSE and NASDAQ rules. They add that investors have come to expect to look in central places for financial news and don’t want to visit a number of corporate websites. In assessing the findings, Goldstein says, ‘we concluded that attorneys generally don’t want clients to be test cases.’

Neil Hershberg, Business Wire’s senior vice president, global media, says he is pleased the survey spotlights the ambiguity surrounding the SEC's guidance and identifies the potential legal risks associated with web-only disclosure. ‘Business Wire welcomes third-party validation of our firm belief that web-only disclosure is not a suitable substitute for a broadly distributed news release via multiple platforms that are readily accessible, and freely available, to professional and retail investors alike,’ he comments.

By Anna Snider