Yesterday, the SEC adopted updated interpretive guidance regarding how companies can use their websites. Here is Corp Fin’s opening statement – and here is the press release (which includes a video from SEC Chair Chris Cox). The interpretive release is not yet available.
Based on comments made during the open Commission meeting and the press release, we know the SEC’s guidance is principles-based that relies on a facts-and-circumstances analysis and is divided into four parts as follows:
1. Reg FD Guidance – How information posted on a company’s site can be considered “public” and provides guidance to help companies comply with Regulation FD. The upcoming release contains factors to help determine whether online information is considered “public” so that subsequent communications would not constitute disclosure of material non-public information, including whether:
(i) a company site is a recognized channel of distribution
(ii) online information is considered broadly disseminated
(iii) information has been posted for a sufficiently long period of time so that it has been absorbed by investors
In addition, the release addresses when disclosure of information on a site is considered adequate to make such information “public” for purposes of the alternative public disclosure prong of Regulation FD (the default prong is furnishing a Form 8-K). At the open Commission meeting, it was predicted that fewer Form 8-Ks will be filed under this guidance.
2. How Liability Standards Work Online – What the liability framework is for electronic disclosure, including how companies can provide access to archived data without it being considered reissued or republished; how companies can link to third party information; appropriate use of summary information; how antifraud provisions apply to statements made by the company in blogs and electronic shareholder forums, and more.
3. No Disclosure Controls Necessary for Website – How information posted on company sites would not be subject to rules relating to disclosure controls and procedures (unless the information is the type to satisfy a ’34 Act obligation). This information remains subject to Rule 10b-5 liability.
4. Printer-Friendly Functionality Not Required – How information need not satisfy a “printer-friendly” standard, unless other rules explicitly require it.
Once the interpretive release itself is available, I’ll blog more including how it stacks up against my ten cents. Dominic Jones has more on yesterday’s open Commission meeting in his IR Web Report blog.
Gulp! The SEC’s View on Lawyer Negligence
A few weeks ago, the SEC issued an order – regarding “In the Matter of Scott G. Monson” – dismissing an enforcement action against the former in-house lawyer of a broker-dealer (this action related to an appeal by the SEC from an administrative law judge’s dismissal of cease-and-desist proceedings). The lawyer had a background in family and real estate law, etc. and took this job without any securities law background; he drafted an agreement based on a sample – and botched the job.
Although the issues in this action are fact-specific, the SEC’s order has some interesting things to say about enforcement actions against lawyers in general. In the order, the SEC acknowledges that “as far as we are aware, we have not sanctioned attorneys in litigated enforcement proceedings based on alleged negligent acts or omissions they may have committed in providing non-public legal advice to clients.”
But then the SEC’s order goes on to list the types of cases that the SEC will pursue against lawyers – and notes that this case doesn’t require the SEC to address the appropriate parameters of lawyer liability in administrative enforcement proceedings because the record didn’t show that the in-house lawyer acted negligently by a preponderance of the evidence. Keith Bishop (who is now at his new firm Allen Matkins) served as an expert for Monson.
All the Latest: Two New Blogs to Check Out
And a former SEC Corp Fin accountant – John Feeney – who has been advising the CFO & audit committee community on strategic financial reporting issues for past ten years has launched his “StreetDisclosure.com Blog“; John provides his first-hand account working with IFRS in this entry.
– Broc Romanek