Wednesday, January 25, 2006

Can we do away with traditional press releases?

It has been suggested by some people, including Amy Gahran (see "Disclosure, Press Releases, and Life Support: Can We Pull that Plug After All?") that traditional press releases are obsolete and no longer needed now that we have all of this Internet and Web media stuff. It has been pointed out the financial disclosure regulations may require press releases, but it's not completely clear.

I did a little research of my own...

In addition to SEC regulation FD, a public company also has to comply with the regulations of any applicable SROs (Self-Regulatory Organizations, the stock exchanges). As the SEC commentary for reg FD notes: "we note that self-regulatory organization ("SRO") rules typically require companies to issue press releases to announce material developments. We believe that these rules are appropriate, and do not intend Regulation FD to alter or supplant the SRO requirements."

So, add the SRO's to your search for "the truth" about press releases for public companies.

One question you'll have to answer yourself is whether you personally consider an SEC Form 8-K to be  "a press release", since a company is off the hook on reg FD as soon as they file a Form 8-K for the "material information."

A cursory reading of the NYSE disclosure "requirements" suggests a requirement for a press release: "News which ought to be the subject of immediate publicity must be released by the fastest available means. The fastest available means may vary in individual cases and according to the time of day. Ordinarily, this requires a release to the public press by telephone, facsimile, or hand delivery, or some combination of such methods." That's for the NYSE. NASD has its own rules.

Here's a non-FD example where the SEC requires a "press release" (Release No. 34-48108; File Nos. SR-NYSE-2002-46 and SR-NASD-2002-140):

An employment inducement award is a grant of options or other equity-based compensation as a material inducement to a person or persons being hired by the listed company or any of its subsidiaries, or being rehired following a bona fide period of interruption of employment. Inducement awards include grants to new employees in connection with a merger or acquisition. Promptly following a grant of any inducement award in reliance on this exemption, the listed company must disclose in a press release the material terms of the award, including the recipient(s) of the award and the number of shares involved.

Ultimately, it appears that there is some amount of flexibility in how "the press" (AP, Reuters, Bloomberg, et al) are actually informed, so it may be up to them whether the info has to be in a specific form that is recognizable as a classic, traditional "press release" or could resemble some form of "new media". In other words, maybe financial disclosure could be done with a simple blog post or even a podcast, but only if "the press" (as detailed by the SEC, NYSE, NASD, et al) were to agree that the information does in fact get into their hands in a timely manner so that they can disseminate it.

-- Jack Krupansky

-- Jack Krupansky

2 Comments:

At 8:42 AM EST , Blogger Amy said...

Excellent food for thought, Jack. Thanks for aiding the exploration into this issue that Todd Van Hoosear and I have embarked on.

We'll be sure to mention your article.

- Amy Gahran

 
At 10:26 AM EST , Blogger Todd said...

Jack, thanks for jumping in here along with Amy, Jeremy (http://pop-pr.blogspot.com/2006/01/wither-goes-wire-services.html) and myself.

I'm finding there's some irony here, as we tend to use the term "press release" when we talk about one of the primary communication tools public companies use, but it's clear that the press:

1. aren't the primary audience for releases anymore; and,
2. don't really like the darn things anyway.

Furthermore, RegFD implicitly *excludes* the press: all *it* cares about are people who might trade the stock based on the information.

I think you make an interesting point:

"[M]aybe financial disclosure could be done with a simple blog post or even a podcast, but only if 'the press' (as detailed by the SEC, NYSE, NASD, et al) were to agree that the information does in fact get into their hands in a timely manner so that they can disseminate it."

Here's the other problem: The editorial process, by its very nature, is selective. Since the whole point of RegFD is to prevent selective disclosure, any editorial intervention by the media could mean some investors see the news and others don't.

It would have to be an automatic process--in which case, who needs the editors?

 

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