Put Up or Shut Up

To comply with Regulation FD, corporate officers are starting to post company news on the Web. But Reg FD has so spooked some corporate officers that they've shied away from practically any informal contact with analysts.

In theory, it is possible for managers at a public company to ignore the Internet and still comply with the Securities and Exchange Commission’s (www.sec.gov) new standards for disclosing corporate information. It’s also possible that Bob Denver will be named patron saint of Uzbekistan, but it’s not likely.

Regulation Fair Disclosure, which took effect in October, works like this: Companies are forbidden to selectively disclose material nonpublic information to investment professionals or to shareholders who might reasonably be expected to trade on that information. Reg FD makes it illegal, for instance, for companies to give an individual analyst guidance on earnings estimates or to share sales trends with institutional shareholders in a closed quarterly conference call.

Certainly, the idea behind Reg FD is noble: Encourage an open airing of corporate information, and thereby reduce the influence analysts and portfolio managers exert on share prices. But a funny thing’s happened on the way to the forum. Reg FD has so spooked some corporate officers that they’ve shied away from practically any informal contact with analysts.

Says George Zouvelos, managing principal of the New York office of media, marketing, and branding specialist The Weiser Group (www.weisergroup.com): “Reg FD has made it impossible for a company to have a meaningful private conversation with an analyst or institutional investor about matters that have not previously been disclosed publicly.”

Indeed, managers at more than half the companies polled in a recent survey indicated they’re now funneling less information to buy- and sell- side analysts or being more cautious in their dealings with those analysts. Moreover, a number of the respondents in the study, which was conducted by Thomson Financial/Carson Global Consulting (www.thomsonfinancialcarson .com) said they would decline to participate in analyst conferences if they weren’t allowed to beam the proceedings over the Internet.

They’re not alone. With the coming of Reg FD, Webcasting is fast becoming SOP at many corporations. Thomson Financial/Carson Global reports that more than one-third of the 81 publicly traded corporations it surveyed began broadcasting their earnings conference calls over the Net following the adoption of the SEC’s new disclosure requirement. More than 30 percent of the companies have also implemented live Webcasting of their presentations at investment banking conferences.

Here’s the kicker. This increasing IR reliance on IP technology worries some IT experts. The Internet is a wonderful medium, they grant, but conducting investor relations in cyberspace can be nettlesome. Posting corporate information on a home page, for example, may help satisfy certain requirements of Reg FD, but it also makes for a whole lot of editing, updating, and reviewing of content. The more material information that goes up on a site, the tougher the task becomes. Even veteran operators of online news sites — sites that specialize in managing content, mind you — admit the difficulties of keeping Web data current and consistent.


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