TheCorporateCounsel.net

As we know all too well, public companies these days are awash in policies and procedures. I think that is generally a good thing, because policies and procedures are critically important for ensuring that public companies comply with SEC and stock exchange requirements and a wide range of other important laws and regulations. One of the big risks of having so many policies and procedures is that sometimes policies may fall into the category of “set it and forget it,” which can create risks for the company and its directors and employees and could potentially defeat the whole purpose of having the policy in the first place.

One policy that unfortunately sometimes falls in to the “set it and forget it” category is the Regulation FD policy and broader policies around public disclosures and investor relations. A Regulation FD/investor relations policy is not specifically required by SEC rules or stock exchange listing standards, but these types of policies were nonetheless adopted en masse way back when Regulation FD was originally adopted in the Summer of 2000. Because the violative conduct contemplated by Regulation FD was different from what was addressed in insider trading policies, many companies felt compelled to adopt Regulation FD policies to provide clear guidelines and procedures for disclosing information in compliance with Regulation FD. The “set it and forget it” risk arises in that Regulation FD has not been substantively changed over the past 24 years, so companies have not had much prompting to go in and take another look at their Regulation FD policies.

Another consideration is the fact that Regulation FD is only part of the story when it comes to the policies and procedures that a company must implement with respect to its overall investor relations and public communications approach. For that reason, many companies have expanded their Regulation FD policies, or adopted separate policies, to address the full range of policies and expectations surrounding communications with the investment community, quiet periods, earnings releases and conference calls, guidance, review of analyst models and reports, dealing with leaks and rumors and the use of social media and other alternative communications channels. These policies and procedures that warrant a frequent review and refreshment, as methods of communication and market norms continue to evolve. To facilitate that review, here is my top ten list of items that should be considered:

1. Does your policy specify authorized spokespersons that can speak to the investment community on behalf of the company, and are the appropriate spokespersons listed? Are others speaking on behalf of the company in practice, but are not identified as authorized spokespersons?

2. Does your policy identify what information is considered “material nonpublic information,” and is that aligned with your insider trading policy?

3. Does your policy contemplate an obligation to immediately advise someone in the organization of any instances of potential intentional or non-intentional disclosure of material nonpublic information?

4. Is your Regulation FD policy aligned with other company policies addressing public disclosure and the communication of information to the general public and the investment community?

5. Do the company’s policies addressing investor relations matters (either as part of the Regulation FD policy or as a standalone policy) provide guidelines for earnings releases, earnings calls, pre-release situations, providing and updating guidance, participation in presentations and meetings and communicating with analysts (including the review of analyst models or reports) that are consistent with the company’s practices?

6. Should the company implement a “quiet period” prohibiting communications with the investment community around the time when earnings information for a quarter is known in order to minimize the risk of selective disclosure, or if the company has implemented a quiet period policy, is that period of time still appropriate?

7. Do the company’s policies addressing investor relations matters provide guidelines on how the company should respond to leaks and market rumors, generally with a “no comment” policy?

8. Do the company’s policies addressing investor relations matters specify a consistent approach for protecting forward-looking statements and complying with non-GAAP financial measure requirements?

9. Do the company’s policies addressing investor relations matters provide guidelines regarding the use of social media and other internet communications?

10. Do the company’s policies addressing investor relations matters prohibit sharing analyst reports and information from such reports to avoid the risk of adoption or entanglement?

For more information about these policies, check out our “Regulation FD” Practice Area. If you are not a member and do not have access to all of the practical resources found in our practice areas, sign up to be a member of TheCorporateCounsel.net today.

– Dave Lynn