Web-Based Disclosure Still Not Ready for Prime Time

The one-year anniversary of the SEC’s Interpretive Guidance Release on web-based disclosure will likely pass unnoticed this weekend– and for good reason. In the eyes of most market participants, it has proven to be a non-event that has gained little traction among issuers reluctant to tinker with a proven and effective disclosure system that works exceptionally well.

In retrospect, there are several reasons why the SEC’s Guidance Release failed to become the landmark event that its supporters had hoped for:

• Within weeks of its issuance, the global financial system was in danger of imploding, diverting the attention of the media, the investment community, and other key audiences. As the markets teetered, most constituents were oblivious to the change — and a good many continue to be unaware of its potential implications to this day.
• The fact that web-based disclosure was a pet project of former SEC Chairman Christopher Cox, vilified by some observers in the wake of the financial crisis, wasn’t a selling point either.
• At the end of the day, however, the major reason why the SEC’s Guidance Release has had marginal impact is simple: The financial marketplace recognized its very real shortcomings. In the process, investors have tacitly reaffirmed a proven regulatory disclosure model that has emerged as the global gold standard.

The orderly flow of price-sensitive information to all market participants — available simultaneously, in real time, and without restrictions, to institutional and individual investors alike — was judged to be too important to be left to chance.  RSS feeds, corporate blogs and standalone web postings are no substitute for the broad-based distribution of a news release via a secure multi-channel distribution platform.

The SEC’s Guidance Release purposely lacked clarity and definition; the variables to meet compliance standards ultimately proved far too vague to justify the risks.

Furthermore, we see constant reminders of why credible information channels are so important. Just this past weekend, Reuters rejected a faxed release originating from the Middle East about a purported takeover that was later exposed as being fraudulent. The editor on duty immediately questioned why a release of this magnitude wasn’t transmitted via a recognized commercial news wire such as Business Wire — and he correctly decided not to run the story.

There is a lot more to the disclosure process than simple “information access.”  Authenticating the source, editorial review, and secure networks all contribute to the effective functioning of the global financial markets. We’ve spent nearly a half-century earning our stripes as a reliable, credible news source, which is more important than ever as governments grapple to restore financial stability and transparency.

We certainly don’t want to seem dismissive of the SEC’s Interpretive Guidance Release. In the final analysis, it cast a much-needed spotlight on important new technology tools that help to expand  investor outreach.

We stated from the outset that corporate web sites, blogs and RSS feeds are indeed valuable adjuncts that can help get the corporate message out. We are certainly huge proponents of technology and, in fact, use many of these complementary tools to augment our patented news delivery network.

It is reassuring to note that once the initial hoopla surrounding the SEC’s Guidance Release died down, reason ultimately prevailed. Slowly emerging is a hybrid approach that retains the broad-based disclosure model at its core, while also including the ancillary communications channels cited in the agency’s position paper.

We’ve seen this evolution before — our own distribution network went from telephone lines, to satellite systems, to Internet protocol. Along the way, we folded in fax, e-mail, RSS feeds, blogs, IR web sites, and any other communication tool that will increase “full and fair” disclosure.

The real winner now that the dust has finally settled: Investors who are enjoying the best of all possible worlds.

— Neil Hershberg, Senior Vice President, Global Media for Business Wire